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REITs are attractive as diversifiers: they tend to have stock-like returns
and risk, but are relatively uncorrelated with other asset classes. For
more information about REITs, see here.
Foreign REITs offer additional diversification benefit.
There are several very similar investment options available. Which is
best?
The funds are listed in rough order of our overall preference.
Preferences are listed separately for use in
retirement accounts and for taxable accounts.
For a listing of our preferences in other asset classes, see
here.
Retirement Accounts (i.e., tax-deferred or tax-exempt accounts)
 | Vanguard Global ex-U.S. Real Estate Fund Admiral Shares (VGRLX). E/R
0.15%. This fund tracks the S&P Global ex-U.S. Property Index of
international real estate stocks in both developed and emerging markets.
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| DFA International Real Estate Securities Portfolio (DFITX). E/R
0.31%. This fund "Invest[s] in a broad
portfolio of securities of non-U.S. companies in the real estate industry,
including developed and emerging markets, with a focus on non-U.S. real estate
investment trusts (REITs) or companies that the Advisor considers REIT-like
entities." The fund is passively managed and weights its
holdings roughly in proportion to each security's market capitalization.
Country weights are generally "based on the total market capitalization
of eligible
companies within each country."
|
| Vanguard Global ex-U.S. Real Estate ETF (VNQI). E/R 0.15%.
This fund tracks the S&P Global ex-U.S.
Property Index of international real estate stocks in both developed and
emerging markets.
|
| iShares S&P World ex-U.S. Property Index Fund (WPS). E/R:
0.48%. This ETF tracks the S&P/Citigroup BMI World ex-U.S. Property
Index.
This is an index of REIT-like companies in developed markets
outside the United States. The fact that this fund is all foreign companies should
diversify an otherwise all-US portfolio. For more information on ETFs,
see here.
|
| iShares FTSE EPRA/NAREIT Global Real Estate ex-U.S. Index Fund (IFGL).
E/R: 0.48%. This ETF tracks the FTSE EPRA/NAREIT Global Real Estate ex-U.S.
Index of companies engaged in the ownership, disposure, and development of the
Canadian, European, and Asian real estate markets. The fact that this fund is all foreign companies should
diversify an otherwise all-US portfolio. For more information on ETFs,
see here.
|
| WisdomTree International Real Estate Fund (DRW). E/R:
0.58%. This ETF tracks the WisdomTree International Real Estate Index.
This is a dividend-weighted index of REIT-like companies in developed markets
outside North America. The fact that this fund is all foreign companies should
diversify an otherwise all-US portfolio. For more information on ETFs,
see here.
|
| SPDR DJ Wilshire International Real Estate ETF (RWX). E/R:
0.59%. This ETF tracks the Dow Jones Wilshire Ex-US Real Estate
Securities Index, an equity index based upon the global (ex-US) real estate
market. The fact that this fund is all foreign companies should
diversify an otherwise all-US portfolio. For more information on ETFs,
see here.
|
| First Trust FTSE EPRA/NAREIT Global Real Estate Index Fund (FFR). E/R:
0.60%. This fund tracks the FTSE EPRA/NAREIT Global Real Estate Index
of real estate companies and REITS engaged in specific aspects of the North
American, European, and Asian real estate markets. The fact that this
fund is about 61% foreign companies should diversify an otherwise all-US
portfolio.
|
| Northern Global Real Estate Index Fund (NGREX). E/R:
0.65% (actually, the expense ratio is 0.75% — it is
temporarily reduced to 0.65%, but that could change at any time without
notice). This fund tracks the FTSE EPRA/NAREIT Global Real Estate Index
of real estate companies and REITS engaged in specific aspects of the North
American, European, and Asian real estate markets. The fact that this
fund is about 75% foreign companies should diversify an otherwise all-US
portfolio. This fund has a redemption fee of 2% on shares sold within 30
days of purchasing. With its relatively high expense ratio, we see
little reason to use it instead of the above alternatives.
|
U.S. REITs generally should not be held in taxable accounts. However,
this issue is a bit more complex for foreign holdings. If held in a
taxable account, you can recover the foreign tax withholding via the foreign tax
credit. But that would also subject the fund's dividends to relatively high income tax
rates. You can defer the income tax by putting it in a retirement account,
but then you permanently lose the foreign taxes. It isn't clear to us the
best way to use these (i.e., in a taxable account or in a retirement account).
| Vanguard Global ex-U.S. Real Estate Fund Admiral Shares (VGRLX). E/R
0.15%. This fund tracks the S&P Global ex-U.S. Property Index of
international real estate stocks in both developed and emerging markets.
We expect the fact that there exists an ETF shares class of this fund will
make it more tax efficient than it would otherwise be.
|
| Vanguard Global ex-U.S. Real Estate ETF (VNQI). E/R
0.15%. This fund tracks the S&P Global ex-U.S.
Property Index of international real estate stocks in both developed and
emerging markets. Unlike virtually all other ETFs, Vanguard ETFs are
only as tax efficient as their underlying open-end mutual fund -- no more
and no less. We expect that to make it fairly tax efficient -- because the ETF share class will likely be a large percentage of the fund's total
assets. For more information on ETFs,
see here.
|
| DFA International Real Estate Securities Portfolio (DFITX). E/R
0.31%. This fund "Invest[s] in a broad
portfolio of securities of non-U.S. companies in the real estate industry,
including developed and emerging markets, with a focus on non-U.S. real estate
investment trusts (REITs) or companies that the Advisor considers REIT-like
entities." The fund is passively managed and weights its
holdings roughly in proportion to each security's market capitalization.
Country weights are generally "based on the total market capitalization
of eligible
companies within each country."
|
| iShares S&P World ex-U.S. Property Index Fund (WPS). E/R:
0.48%. This ETF tracks the S&P/Citigroup BMI World ex-U.S. Property
Index.
This is an index of REIT-like companies in developed markets
outside the United States. The fact that this fund is all foreign companies should
diversify an otherwise all-US portfolio. For more information on ETFs,
see here.
|
| iShares FTSE EPRA/NAREIT Global Real Estate ex-U.S. Index Fund (IFGL).
E/R: 0.48%. This ETF tracks the FTSE EPRA/NAREIT Global Real Estate ex-U.S.
Index of companies engaged in the ownership, disposure, and development of the
Canadian, European, and Asian real estate markets. The fact that this fund is all foreign companies should
diversify an otherwise all-US portfolio. For more information on ETFs,
see here.
|
| WisdomTree International Real Estate Fund (DRW). E/R:
0.58%. This ETF tracks the WisdomTree International Real Estate Index.
This is a dividend-weighted index of REIT-like companies in developed markets
outside North America. The fact that this fund is all foreign companies should
diversify an otherwise all-US portfolio. For more information on ETFs,
see here.
|
| SPDR DJ Wilshire International Real Estate ETF (RWX). E/R:
0.59%. This ETF tracks the Dow Jones Wilshire Ex-US Real Estate
Securities Index, an equity index based upon the global (ex-US) real estate
market. The fact that this fund is all foreign companies should
diversify an otherwise all-US portfolio. For more information on ETFs,
see here.
|
| First Trust FTSE EPRA/NAREIT Global Real Estate Index Fund (FFR). E/R:
0.60%. This fund tracks the FTSE EPRA/NAREIT Global Real Estate Index
of real estate companies and REITS engaged in specific aspects of the North
American, European, and Asian real estate markets. The fact that this
fund is about 61% foreign companies should diversify an otherwise all-US
portfolio.
|
| Northern Global Real Estate Index Fund (NGREX). E/R:
0.65% (actually, the expense ratio is 0.75% — it is
temporarily reduced to 0.65%, but that could change at any time without
notice). This fund tracks the FTSE EPRA/NAREIT Global Real Estate Index
of real estate companies and REITS engaged in specific aspects of the North
American, European, and Asian real estate markets. The fact that this
fund is about 75% foreign companies should diversify an otherwise all-US
portfolio. This fund has a redemption fee of 2% on shares sold within 30
days of purchasing. With its relatively high expense ratio, we see
little reason to use it instead of the above alternatives. |
This web page contains the current opinions of Eric E. Haas at the time it is
written — and such opinions are subject to change
without notice. This web page is intended to serve two purposes:
| To educate the public; and |
| To provide disclosure of Mr. Haas' opinions to prospective clients.
We believe that prospective clients are well-served by being made aware of
what they are buying — and what they are buying is advice
that is based on these opinions. |
We believe the information provided here to be useful and accurate at the time
it is written.
Information contained herein has been obtained from sources believed to be
reliable, but is not guaranteed.
No investor should invest solely on the basis of information listed here.
Before investing, it is important to consult each prospective investment's
prospectus and consider both its risk/return characteristics and its effect on
your overall portfolio.
This information is not intended to be a
substitute for specific individualized tax, legal, or investment planning
advice. Where specific advice is necessary or appropriate, Altruist
recommends consultation with a qualified tax adviser, CPA, financial planner, or
investment adviser. If you would like to discuss the rationale or support
for any particular idea expressed on this web page, feel free to
contact us. |
