Why VNQ Is The Most Popular Real Estate ETF
/| VNQ REIT ETF | |
|---|---|
| Fund Inception | 2004 |
| Dividend (TTM) | $3.21 |
| Expense Ratio | 0.12% |
| Number of Stocks | 174 |
| Top 10 Holdings | 44.9% |
| Foreign Holdings | 0.0% |
The Vanguard Real Estate Investment Trust ETF (VNQ) is the most popular REIT investment product available today with a net asset value of over $72 Billion across 174 stocks issued by Real Estate Investment Trusts (baskets of real estate).
VNQ is Vanguard’s most popular REIT ETF. VNQ was created in 2004 and is designed to provide investors exposure to a mix of real estate stocks by tracking the return of the MSCI US Investable Market Real Estate 25/50 Index.
Investing in VNQ is akin to investing in the American real estate economy. VNQ’s low-fee nature and broad exposure to American real estate has helped it become the most popular REIT ETF in the world. According to Vanguard, VNQ is “appropriate for helping diversify the risks of stocks and bonds in a portfolio.”
A LINE CHART OF VNQ STOCK PRICE SINCE INCEPTION.
Why VNQ is the most popular REIT ETF
7 reasons VNQ is a popular investment:
Low fees
Diversification
No property management required
Easy to understand
More liquid than physical real estate
Pays a high dividend
History of increasing in value over the long-term
VNQ has no minimum investment
Because VNQ is an exchange traded fund (ETF), it doesn’t have a minimum investment like it’s index fund counterpart (VSGLX). You can purchase VNQ for the price of 1 share and it trades during market hours.
VNQ has a history of market returns during good and bad times
Here are the returns that VNQ has posted over the 1-, 3-, 5-, 10-year, and since inception:
1-Year: 35.36%
3-Year: 13.52%
5-Year: 8.27%
10-Year: 9.12%
Since Inception (2004): 9.02%
VTSAX has returned 9% average annual returns since the funds inception. This type of dependable figure is used to calculate your financial independence number or the number at which you will be able to pay yourself in retirement instead of relying on earned income from an employer.
Major stock market events that occurred since 2000:
2001: 8-month recession (dot-com bust) and the 9/11 terrorist attacks.
2003: Start of Iraq war
2008/2009: The Great Recession
2020: COVID-19 and Recession
Interest in VNQ is growing rapidly
It’s no wonder why the price of VNQ continues to increase over time. The net asset value is over $72 Billion, it provides investors with real estate exposure, provides a healthy dividend income and has growth potential.
The image below is the Google Trends result for “VNQ.” As you can see, interest in VNQ has been growing significantly over the past decade.
AN IMAGE OF VNQ INTEREST OVER TIME FROM GOOGLE TRENDS.
VNQ one fund portfolio
Thinking of a one-fund portfolio made up of only VNQ? You’re not actually only investing in a single asset, but rather a basket of real estate assets. By purchasing VNQ, you’re actually purchasing ownership shares in 174 real estate stocks.
VNQ’s largest holdings
At the time of the last update per Vanguard on 4/30/2021, here are the top 10 holdings within VNQ:
Vanguard Real Estate II Index Fund
American Tower Corp.
Prologis Inc.
Crown Castle International Corp.
Equinix Inc.
Public Storage
Digital Realty Trust Inc.
Simon Property Group Inc.
SBA Communications Corp.
Welltower Inc.
VNQ portfolio growth forecast
Let’s say you’re able to max out an IRA each year at $6,000 where you invest your money in VNQ for 20-years. You’d have a portfolio value of about $335,000.
AN IMAGE OF VNQ COMPOUNDED AT 9.02% INTEREST FOR 20-YEARS.
If you invest in VNQ for the next 40-years, you could have a portfolio value of over $2.2 million.
AN IMAGE OF VNQ COMPOUNDED AT 9.02% INTEREST FOR 40-YEARS.
Summary
Adding VNQ (or VSGLX) to your investment portfolio provides you with several benefits:
Passiveness
Diversification
Real estate exposure
Dividends
Low investment minimum
History of 9 percent market returns
