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U.S. News evaluated 72 Real Estate Funds. Our list highlights the top-rated funds for long-term investors based on the ratings of leading fund industry researchers.
Note: Profile written for different share class.
The fund has returned 13.37 percent over the past year, 11.79 percent over the past three years, 23.80 percent over the past five years, and 9.81 percent over the past decade.
|Trailing Returns||Updated 06.30.2014|
|Year to date||17.7%|
|3 Years (Annualized)||11.8%|
|5 Years (Annualized)||23.8%|
|10 Years (Annualized)||9.8%|
The Vanguard REIT Index is a real estate investment trust fund that offers investors wide exposure in the real estate sector at a low price.
As of July 03, 2014, the fund has assets totaling $43.70 billion. Its portfolio consists of stocks of publicly traded equity real estate investment trusts, known as REITs. The fund aims to replicate the returns of the MSCI U.S. REIT Index by investing all, or virtually all, of its assets in stocks within the index.
REITs are companies that own and manage real estate. They distribute at least 90 percent of their taxable income to shareholders and receive at least 75 percent of their income from rent, mortgages, and sales of property. REITs offer investors greater liquidity and diversification than an investor would get directly owning properties. Also, REITs offer investors a higher potential for income than common stocks. REITs experienced a breathtaking rally that started in March 2009 and lasted through part of this year. While the sector has since calmed down, real estate was, as of the beginning of July, the only one of Morningstar's domestic stock categories to be in the black year-to-date. The fund has returned 13.37 percent over the past year and 11.79 percent over the past three years.
Among REIT funds, Morningstar says this fund is "one of the cheapest, no-fuss ways to add sector exposure to your portfolio." The fund has returned 23.80 percent over the past five years and 9.81 percent over the past decade.
The fund holds each of its stocks in approximately the same proportion as the weighting in the MSCI U.S. REIT Index. The fund invests in equity REITs, which generate income from rental and lease payments and have the potential of growth from property appreciation, in addition to some capital gains from the sale of property.
Role in Portfolio
Morningstar says this fund plays a specialty role in an investment portfolio. Morningstar recommends that the fund make up no more than 5 percent of an investment portfolio.
The fund is passively managed by Gerard O'Reilly, who has been the fund's day-to-day manager since 2005. He has worked with the fund in some capacity since its 1996 inception and has been with Vanguard since 1992. Gus Sauter, the chief investment officer and managing director of Vanguard, managed the fund from 1996 to 2005.
Vanguard REIT Index Fund has an expense ratio of 0.10 percent.
REIT stocks, which are usually small- or mid-cap stocks, have trailed the overall stock market in the past. The fund is also susceptible to the risk of industry concentration, and there's always a chance that REITs may decline because of adverse developments in the real estate industry.