Exchange Traded Funds (ETFs)

Real Estate ETF Focuses on REITs

The Real Estate Select Sector SPDR Fund (NYSEARCA: XLRE) is an exchange-traded fund that can give a prospective investor access to the segment of the global economy that is involved with real estate.

Specifically, XLV tracks the Real Estate Select Sector Index, which, in turn, attempts to provide an effective representation of the real estate sector of the S&P 500 Index. This exchange-traded fund was launched in October 2015 when the Global Industry Classification Standard (GICS) financial sector was divided into the financial sector and the real estate sector.

Initially, XLRE’s liquidity was quite poor as it was unable to match the level of liquidity that its sister ETFs had managed to obtain. However, this situation changed in September 2016, when XLRE’s sister ETF, the Financial Select Sector SPDR Fund (XLF), which I have featured previously in The Deep Woods, had to part with its real estate investment trusts (REITs) to meet the new classification standard. As a result, XLF transferred $3 billion in assets under management to XLRE. By doing so, XLRE’s liquidity improved a great deal.

Currently, the fund’s assets are divided among specialized REITs: 43.60%; Commercial REITs, 39.50%; Residential REITs, 14.70%; and Real Estate Services, 2.20%.

This fund’s top holdings include American Tower Corporation (NYSE: AMT), Crown Castle International Corp. (NYSE: CCI), Prologis Inc. (NYSE:PLD), Simon Property Group Inc. (NYSE: SPG), Equinix Inc. (NASDAQ: EQIX), Public Storage (NYSE: PSA), Welltower Inc. (NYSE: WELL), Equity Residential (NSYE: EQR) and AvalonBay Communities Inc. (NYSE: AVB).

The fund currently has more than $3.57 billion in assets under management and an average spread of 0.03%. It also has an expense ratio of 0.13%, meaning that it is less expensive to hold than many other ETFs.

This fund’s performance has been solid in both the short and long terms. As of Aug. 5, XLRE is up 1.10% over the past month, 4.68% over the past three months and 22.60% year to date.

Chart courtesy of StockCharts.com

While XLRE does provide an investor with a chance to profit from the real estate segment, the sector may not be appropriate for all portfolios. Thus, interested investors always should do their due diligence and decide whether the fund is suitable for their investing goals.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Intelligence Report, Investing Edge, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.