REITs which owns and operate real estate assets make up one of the largest sectors in the US market. REIT ETFs are passive index funds that can provide diversified REIT exposure for investors but not the Indexes are created equal. There is multiple options available for investors from ETFs invested in US REITs or global REIT ETFs which each has its own REIT index it tracks.
REIT Index List
- FTSE NAREIT All Equity Index
- FTSE NAREIT Mortgage REIT Index
- FTSE NAREIT Real Estate 50
- FTSE NAREIT Preferred Stock Index
FTSE NAREIT composite is a combination of all the FTSE NAREIT Indexes. It is an index which comprehensively covers the REIT sector from office, malls to residential sectors to sub asset classes like Mortgage REITs.
FTSE NAREIT All Equity Index focus just on the equities or stocks of listed REITs. It is market capitalization weighted passive REIT index covering more than 160 REITs. Top 10 positions in the index covers more than 35% of the Index.
- FTSE Mortgage REIT invests in over 35 mortgage REIT. It allows diversified sector exposure as most mortgage REITs are diversified, it adds another layer of diversification. (see our Mortgage List REIT List if you are looking for individual Mortgage REIT position.)
- FTSE NAREIT Real Estate 50 is a concentrated REIT Index which invests in the 50 largest REITs. The largest constituent comprise almost 10% of the index and Top 10 position accounts for more than 45% of the Index.
Down Jones REIT Index
State Street Global Advisors REIT ETF (RWR) uses the Dow Jones Equity All REIT Index.
Dow Jones Equity All REIT Index Performance
MSCI REIT Index
MSCI US REIT Index is the main index of one of the best REIT ETFs, Vanguard REIT ETF. It is a low cost option for investors that are looking for low cost exposure to diversified portfolio of REITs.
REITs provide income and capital growth. Income leaning investors can also use preferred stocks which sits higher on the capital structure ahead of equity. It mitigate some of the risks investing in REITs.
Theoretically returns are lower as it is lower risk, there is also less volatility. Since 2005, annualized volatility of preferred average 60% of the overall REIT index.
MSCI provides one of the only Preferred Stock REIT index which includes more than 100 preferred stocks of REITs. It is also diversified as no particular issue accounts for more than 5% of the index.
Wilshire REIT Index
Wilshire is an alternative passive index REIT Index provider. The index comprise of around 100 listed REITs.