ETF Growth Strategy #2: Consider Alternative Asset Classes for Diversification
Another sector that has been the beneficiary of repositioning this year is REITs. The Vanguard REIT ETF (VNQ) is in the top five ETFs for new asset inflows in 2014 with nearly $2 billion. VNQ has gained over 11% to start the year and pays a 30-day SEC yield of 3.63%.
This sector has been buoyed by lower interest rates, has continued to show strong relative momentum, and has been largely unaffected by broader equity volatility this year.
I consider REITs to be an alternative asset class because their returns are often times non-correlated with traditional stock market indices. They may offer an opportunity for additional growth and income this year in the context of a diversified portfolio.
One of the advantages of VNQ over other ETFs in this sector is that it charges a miserly expense ratio of just 0.1%. That should please even the most fee-sensitive investor who is looking to gain exposure to a basket of publicly traded real estate companies.