This ETF is Designed to Shelter Your Portfolio

Doug Fabian

Doug Fabian is known for his expert knowledge of ETFs, bear funds and enhanced index funds to profit in any market climate.

A sharp December decline in the market had many investors running for the hills. While the market has since staged a recovery, the retreat earlier in the month shows the importance of having a strong, safe place to protect your assets from a potential market fall in 2015. To that end, this week’s ETF Talk features a fund that has been providing a strong safe haven which has hardly been touched by the recent correction, mainly because its assets are not as affected by the whims of the market.

Enter the Vanguard REIT Fund (VNQ).

As a real estate investment trust (REIT), VNQ’s investments are in the currently stable real estate market. Plus, this ETF also provides a nice 3.13% dividend yield. While VNQ was featured in an ETF Talk about two months ago, it has increased in strength since that time, and I believe the changing market conditions warranted a look at the stability this fund could offer in turbulent times.

Since its previous appearance in the ETF Talk, VNQ has increased another 5.87%, bringing its year-to-date profitability to 27.12%. Investors may be moving their assets into REITs to protect their money from the market drops. Indeed, VNQ has outperformed the S&P 500 throughout this period of market weakness. As shown in the chart below, the December sell-off barely registered.


VNQ’s holdings have changed slightly since the last time it was featured in an ETF Talk earlier this year. It now has 37.8% of its total assets invested in its top 10 holdings. The top five of these are: Simon Property Group, Inc. (SPG), 8.35%; Public Storage (PSA), 4.09%; Equity Residential (EQR), 3.62%; Health Care REIT, Inc. (HCN), 3.54%; and ProLogis, Inc. (PLD), 3.14%.

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In a sense, investing in REITs gives investors a way to hedge against the market and grab onto more physical assets. A REIT lets people invest in real estate without the need to buy a house or any other kind of property, which would require a much larger investment and would be relatively illiquid in the short term. As an ETF, VNQ is easy to trade, and its low expense ratio of 0.1% makes it easy to own. If real estate sounds like an attractive way to shelter your assets from any potential market storm, you may want to consider Vanguard REIT Fund (VNQ).

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 bond fund, BSV. I also invite you to comment in the space provided below.

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