HomeMost PopularThe Upsides, Downsides, and Challenges of VNQ

The Upsides, Downsides, and Challenges of VNQ

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Recalling the memorable Clint Eastwood western, β€œThe Good, The Bad, and The Ugly,” I am reminded of the mixed elements present in the REIT ETF known as VNQ.

This specific ETF, while not being subject to a film critique, showcases both positive and negative aspects, as depicted by its price chart.

Comparison over the past year reveals that the Vanguard Real Estate Index Fund ETF Shares (NYSEARCA:VNQ) has significantly underperformed the S&P 500 (SPY). However, for value investors seeking opportunities, the real estate sector holds promise.

The recent bullish market, largely led by the technology sector, has overshadowed the struggles of various other industries. In the S&P 500, half of the sectors remain in negative territory. Real Estate, in particular, has faced challenges due to rising interest rates.

While the entire real estate sector may experience ongoing pressure for a few more months, it is believed that the cycle is closer to its end than its beginning.

Those interested in real estate have a broad range of REITs to choose from, spanning various sectors such as retail, hospitality, apartments, and more.

Investing in the real estate sector can be done through the Vanguard Real Estate ETF (VNQ), which provides exposure to a diverse portfolio of REITs in the US. This ETF, formed in May 1996 and managing approximately $31 billion in assets, tracks the MSCI US Investable Market Real Estate 25/50 Index. With a low expense ratio of 0.12% and a dividend yield of 4.7%, VNQ offers an attractive investment option.

Top Holdings within VNQ

VNQ consists of 168 positions, making it a comprehensive and extensive ETF. Owning shares in VNQ allows investors to have exposure to nearly every REIT in the US, as well as a few real estate companies.

However, there are a few individual REITs within VNQ that stand out:


Prologis is a leading industrial and warehouse REIT with a market cap of $114 billion. Despite a 4% decline in its stock price over the past year, Prologis maintains a dividend yield of 2.9%.

American Tower

American Tower is the largest cell tower REIT, with a market cap of $82 billion. Share prices have fallen over 30% in the past year, primarily due to issues faced by telecom companies, its largest tenants. However, American Tower offers a dividend yield of 3.6%.


Equinix, the largest data center REIT, has a market cap of $70 billion. With the increasing demand for data centers due to cloud computing, Equinix has experienced a 14% increase in share prices over the past year. The REIT provides a dividend yield of 1.8%.

Crown Castle

Crown Castle, the second-largest cell tower REIT, has a market cap of $43 billion. Like American Tower, the stock has faced a significant decline of over 40% in the past year. However, Crown Castle offers a high dividend yield of 6.3%.

Public Storage

Public Storage is the largest self-storage REIT, with a market cap of $48 billion. Share prices have fallen nearly 20% in the past year. However, Public Storage maintains a high dividend yield of 4.4%.

Realty Income

Realty Income, known as β€œThe Monthly Dividend Company,” is a net lease retail REIT with a market cap of $40 billion. Share prices have also fallen nearly 20% in the past year, but Realty Income offers a high dividend yield of 5.4%.

Simon Property Group

Simon Property Group is a highly-rated mall landlord with a market cap of $42 billion. Unlike many struggling malls, Simon Property Group has maintained its success. Share prices have increased by 5% over the past year, and the REIT boasts a high dividend yield of 6.9%.


Welltower is the largest healthcare REIT, specializing in senior housing properties. With a market cap of $41 billion, Welltower has experienced a 5% increase in share prices over the past year. The REIT offers a dividend yield of 3.1%.

Digital Realty Trust

Digital Realty Trust is a substantial data center REIT with a market cap of $38 billion. While share prices have remained relatively flat over the past year, Digital Realty Trust provides a dividend yield of 3.9%.

A Diverse Investment Option

VNQ offers investors an all-inclusive package, incorporating a wide range of REITs and real estate companies. While VNQ can be an excellent choice due to its diversity, investors could consider developing their own ETF by investing in the standout individual REITs mentioned above.

However, it’s worth noting that our team has also launched the iREIT-MarketVectorβ„’ Quality REIT, an ETF index that aims to provide exposure to high-quality US listed REITs while ensuring sector diversification. This strategy involves selecting the highest quality REITs based on comprehensive quality and value assessments, resulting in a less diversified but still well-rounded ETF.

VNQ is currently trading at $80.94 per share, offering a dividend yield of 4.7%. With an expense ratio of 0.12%, VNQ is known for having one of the lowest expense ratios in the REIT ETF sector.

Our team has dedicated significant effort to researching ETFs, focusing on various funds over the past six months. These include:

  • iShares Barclays Agency Bond ETF (AGZ)
  • Healthcare Select Sector SPDR Fund (XLV)
  • Vanguard REIT Index Fund (VNQ)
  • Utilities Select Sector SPDR Fund (XLU)
  • iShares MSCI Taiwan Index Fund (EWT)

For more information on these funds and their performances, you can explore our recent articles.

Disclaimer: This article is for informational purposes only and should not be regarded as investment advice. It is essential to conduct thorough research and seek professional advice before making any investment decisions.

Source : Seekingalpha.com

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