Categories: Exchange Traded Funds (ETFs)Real Estate & HousingU.S. Investing

How This Real Estate Fund Rides Recent Recovery

The ETF Talks of the past few weeks have introduced you to some of the most prominent funds offered by Vanguard, a large and cost-effective exchange-traded fund (ETF) provider. Today, we continue that series with Vanguard Real Estate Investment Trust ETF (VNQ). With $43.1 billion in assets under management, VNQ is Vanguard’s fourth-largest ETF. Its competitive 0.1% expense ratio is 93% lower, according to Morningstar, than the average for similar funds.

This ETF, unlike the broader funds we have introduced so far, focuses on a particular sector. VNQ tracks an index that measures the performance of publicly traded equity real estate investment trusts (REITs). VNQ matches the holdings of the index as closely and as proportionately as possible.

VNQ is up 20.76% so far in 2014, as the chart below demonstrates, and it has fully recovered from a recent September stumble. The fund also offers investors a dividend yield of 3.51%.

As a REIT ETF, all of VNQ’s assets are invested in the real estate sector. VNQ’s top 10 holdings comprise 38.24% of its portfolio, a higher percentage than its more diversified counterparts. These top holdings include Simon Property Group, Inc. (SPG), 8.69%; Public Storage (PSA), 4.14%; Equity Residential (EQR), 3.59%; Health Care REIT, Inc. (HCN), 3.44%; and ProLogis, Inc. (PLD), 3.20%.

REITs are legally required to pay out 90% of their taxable income as dividends, so investors receive steady income no matter how the overall market performs. If this income-oriented investment sounds enticing to you, you may want to take a look at Vanguard REIT ETF (VNQ).

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If you want my advice about buying and selling specific ETFs, including appropriate stop losses, please consider subscribing to my Successful ETF Investing newsletter. As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an e-mail. You just may see your question answered in a future ETF Talk.

In case you missed it, I encourage you to read my e-letter column from last week about Vanguard’s developed market ETF. I also invite you to comment in the space provided below.

Doug Fabian

Doug Fabian is the Editor of Weekly ETF Report, a free weekly e-newsletter, and the newsletter Successful ETF Investing. He’s also the host of the syndicated radio show, “Doug Fabian’s Wealth Strategies.” Doug also edits the fast-paced trading service ETF Trader’s Edge, for investors who want to take their profits to the next level. Taking over the reins from his dad, Dick Fabian, back in 1992, Doug has continued to uphold the reputation of the newsletter as the #1 risk-adjusted market timer as ranked by Hulbert’s Investment Digest. Doug became a member of the “SmartMoney 30” in 1999 — a listing of the most influential individuals in the mutual fund industry. In the feature, SmartMoney magazine exclaims that Doug is the best-known “trend follower” among the $56 billion (and growing) group of financial advisors. In 2001, Doug wrote “Maverick Investing,” published by McGraw-Hill. He also regularly appears at seminars around the country, stands out on the pages of the largest newspapers (The Wall Street Journal, The Los Angeles Times, and The New York Times), and speaks on national television (CNBC, Fox News, and Bloomberg Forum). For more than 35 years, Successful ETF Investing (formerly the Telephone Switch Newsletter and Successful Investing) has produced double-digit percentage annual gains. Doug has become known for his expert knowledge and timely use of innovative tools, such as exchange-traded funds, bear funds, and enhanced-index funds to profit in any market climate. For more information about Doug’s services, go to http://www.fabian.com/