In a quarter when the S&P 500 delivered double-digit gains. If you’re looking for a Vanguard U.S. REIT fund to outpace the index, look no further than the Vanguard Real Estate ETF (NYSEARCA:VNQ). VNQ ETF just keeps looking better.
According to Nareit, the FTSE All REITs Index delivered a Q1 2019 return of 16.7%, 300 basis points higher than the S&P 500. Doing even better than the broadest U.S. REIT index in the first quarter, VNQ had a return of 17.4%, 70 basis points higher than the country’s broadest REIT index.
How do I get me some of that? Seriously, though, there’s a lot to like about this particular Vanguard U.S. real estate fund.
Here are three big reasons to have VNQ in your portfolio.
1. Significant Exposure to U.S. Real Estate
The beauty of ETFs is that they allow you to buy a wide swath of businesses in a particular sector without breaking the bank. Everyday investors with $10,000 portfolios can feel like big wigs without it costing them an arm and a leg.
The VNQ gives you an investment in 188 stocks or funds involved in real estate. Diversified across many different segments of the real estate industry, it’s top ten holdings, 41% of VNQ, are a who’s who of the best owners of real estate in the country.
Believe in office space. It’s got it. Residential? Same thing. In total, it has at least some weighting in 12 different areas of the real estate industry.
Tracking the MSCI US Investable Market Real Estate 25/50 Index, VNQ is the largest U.S. REIT fund with total net assets of $61 billion. Not only is it the largest real estate ETF it’s also the 21st largest ETF in the country of any kind.
Liquidity is not an issue.
2. VNQ ETF Is a Great Deal
If I told you that you could own 188 real estate companies for just $1.20 in fees per $1,000 invested, you’d say to me I was crazy. With all the commission-free trading available today, DIY investors have no excuse missing out on VNQ.
Not only is this ETF cheap, but it also provides excellent protection against inflation. Plus, it tends to do okay in volatile markets. Sure, we haven’t seen any in 2019, but they’re bound to visit investors soon enough.
VNQ is especially useful for anyone who rents rather than owns. That’s because you don’t have a home, what’s considered a non-correlating asset to the stock market, to fall back on. If you’re a renter at any age, this ETF is entirely appropriate.
3. VNQ ETF Performance
In September, VNQ ETF will be 15 years old.
If you bought $10,000 of VNQ at the start, today you’d have $35,582. If you purchased $10,000 of the SPDR S&P 500 ETF (NYSEARCA:SPY), you’d have $873 less. I know that’s not much of a difference. However, if you take the last 11 calendar years, VNQ outperformed SPY in seven out of the 11 years.
As the bull market finally comes to an end after more than a decade, you’re going to be very glad that you own an ETF that invests in hard assets.
Furthermore, VNQ ETF is outperforming SPY in 2019, an excellent sign after three years lagging it. Reversion to the mean is setting in. I’d expect VNQ to continue to beat throughout 2019 and into 2020.
Own this and SPY, and you’re set for equities.
At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.