A Fund That Profits from Real Estate Trends

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker, financial journalist, and money manager.

COVID-19 has done a number on the real estate market. In many places, the sellers’ market exacerbated by COVID-19 still persists, and that can make things difficult for people or businesses looking to secure a location. So, those individuals and businesses that already own real estate, whether to sell or in this case primarily rent, have found themselves in an advantageous position. One potential way to take advantage of this trend is through an exchange-traded fund (ETF) like iShares Residential and Multisector Real Estate ETF (REZ).

This fund invests in a broad swath of U.S. real estate investment trusts (REITs). This includes residential REITs, health care REITs, and specialized REITs such as Public Storage (PSA). This fund was recently changed from its former investment strategy focused only on residential REITs – hence the ticker symbol. The fund has some built-in diversification measures, including a clause stating that holdings over 5% can make up only 45% of assets.

REITs are usually dividend-paying investments due to their legal structure. As a result, REZ pays out close to 2%, which is higher than many ETFs. The fund’s expense ratio of 0.48% is ordinary. Assets under management total $1.25 billion.

REZ has had solid results this year, up 38.9%. It has averaged returns of about 12% annually, not including dividends, over a longer time frame.

Chart courtesy of StockCharts.com

REZ has 44 positions in total. The top 10 holdings have just under 60% of the fund’s assets invested in them, and they include Public Storage (PSA), 9.86%; Welltower Inc. (WELL), 7.59%; AvalonBay Communities Inc. (AVB), 6.64%; Equity Residential (EQR), 6.48%; and Invitation Homes Inc. (INVH), 4.83%.

For investors seeking to make profits from the domestic real estate market as a whole and gain some nice dividend payouts at the same time, iShares Residential and Multisector Real Estate ETF (REZ) is an investment that may be worth consideration.

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