U.S. Investing

A Fund That Profits from Real Estate Trends

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%.

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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.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Successful Investing, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.