A Lay of the Land of REIT ETFs

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tdp2664 InvestorPlace Real Estate Investment Trusts, or REITs, are designed to pool capital to buy and operate income-producing real estate. Because of the nature of the structure, REITs are required to distribute at least 90% of their income to shareholders. REITs tend to focus on specific types of income-producing properties or geographical locations. The vast number of REITs available makes the selection, analysis and purchase of shares in the right program difficult. ETFs offer the average investor exposure to this asset class without having to analyze each potential investment. REITs offer returns to investors in two ways: the combined pricing of the shares, and the dividend return. Investors should keep in mind that the appraised values of the real estate holdings do not influence the day-to-day price of the shares. However, looking at the underlying real estate value and comparing it to the share price might give some indication of purchasing REITs (or REIT ETFs) at a discount. One ETF that brings a packaged program to market is the Vanguard REIT ETF (NYSE: VNQ ). VNQ, established Oct. 1, 2004, has a current dividend yield is 3.41%, based on a share price of $50.87. The returns as of Aug. 31, 2011, are listed below. 1 month: -5.62% 3 months: -7.33% YTD: 5.65% 1 year: 18.59% 3 years: 2.84% 5 years: 0.61% VNQ makes ongoing portfolio changes, so quarter-over-quarter holdings might result in significant rebalancing. The exact composition and weightings are subject to reporting bias by VNQ and the tracking services that collect this data. The top 10 holdings as of Aug. 31, 2011, are Simon Property Group (NYSE: SPG ), Equity Residential (NYSE: EQR ), Public Storage (NYSE: PSA ), Boston Properties (NYSE: BXP ), HCP (NYSE: HCP ), Ventas (NYSE: VTR ), Vornado Realty Trust (NYSE: VOR ), Avalon Bay Communities (NYSE: AVB ), ProLogis (NYSE: PLD ) and Health Care REIT (NYSE: HCN ). The total weighting is 46.7%. Another participant in the REIT marketplace is Cohen & Steers, which manages several real estate mutual funds and a few ETFs. One of the ETFs is the Cohen & Steers Global Realty Majors ETF (NYSE: GRI ). GRI was established on May 7, 2008, and seeks opportunities in Europe, Asia, North America, and Latin America.