I had recently written about my decision to buy some REITs (Real Estate Investment Trusts). REITs are a good way to add diversification to your portfolio since they are not closely correlated with equity returns. In the last post I looked at an ETF and several individual Canadian REITs. I’ve been thinking that I will put half of my REIT allocation into American REITs. The 50/50 split is a vary arbitrary number – there are lots of good reasons why I should own more US REITs compared to Canadian and there are lots of more good reasons why I should focus on Canadian REITs. That will be a discussion for another day.
One of the problems with the ishares REIT ETF (XRE) is the higher management fee of 0.55% which is high for a general REIT. I took a look at the Vanguard ETF lineup to see if it had a similar product for U.S. REITs and sure enough I found VNQ – Vanguard REIT ETF.
VNQ management fee (MER)
This ETF has a management fee of only 0.12% which is very reasonable, so in my opinion if you want to index with U.S. REITs then this ETF is a better choice than trying to buy a pile of individual securities.
What the VNQ REIT covers
According to the Vanguard VNQ strategy and policy page, VNQ tracks the MSCI US REIT Index which is a benchmark that tracks approximately two-thirds of the U.S. REIT market.
This ETF looks like the right one for me. I will be purchasing some VNQ (amex:vnq) in the near future and it will make up one half of my REIT allocation. Stay tuned for the exciting conclusion of what I finally decide to buy for my Canadian REIT allocation.
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