Vanguard Real Estate Index VGSLX and Vanguard Real Estate ETF VNQ are among the best U.S. real estate funds available.
The strategy charges very little for a broad portfolio that accurately tracks the U.S. real estate market, spreads its bets over dozens of holdings, and follows the market’s collective wisdom about their individual valuations and prospects by market-cap weighting. The strategy’s efficacy affirms a Morningstar Medalist Rating of Gold for the admiral, institutional, and exchange-traded share classes and warrants an upgrade for the pricier investor share class to Gold from Silver.
This fund fully replicates the MSCI US Investable Market Real Estate 25/50 Index, which mostly consists of equity real estate investment trusts. Equity REITs own and operate income-producing real estate, so this portfolio is a good proxy for the U.S. real estate market. Some real estate management companies squeeze into the index as well, but they tend to represent less than 5% of the portfolio.
The fund weights securities that make the index’s cut by market cap, a cost-efficient tack that channels the market’s collective view on the relative value of each holding. Most portfolio additions attract significant investor attention, so they tend to be priced accurately. Market-cap weighting also helps mitigate turnover and the related transaction costs. The fund’s benchmark also employs buffers designed explicitly to limit those costs.
Market-cap-weighted sector index funds can be concentrated. This index’s broad reach and constraints keep it out of trouble. The top 10 holdings accounted for between 36% and 50% of the portfolio over the past five years; its average peer ranged from 45% to 65%. Specialized REITs form 28% of the portfolio, but their variety alleviates concentration concerns. The fund had tended to land near the center of the Morningstar Style Box with names like cheap office REIT Vornado Realty Trust VNO and richly valued data center operator Digital Realty Trust DLR at opposite ends of the value-growth barbell.
This portfolio’s dimensions mimic the average U.S. real estate Morningstar Category fund. The portfolios lean into different property types on occasion, but their market-cap and value-growth orientations are nearly identical. That’s the point: by mimicking the category average at very low cost rather than trying to beat it while charging a higher fee, the fund gives itself and its investors an excellent shot at strong category-relative performance over the long term.
Vanguard Real Estate Index: Performance Highlights
Since adopting its current benchmark in February 2018, this fund has built on the solid track record it had compiled with its previous index. Its admiral shares beat the category average by 68 basis points annualized from that point through December 2023. Solid contributions from specialized REITs powered returns over that span, but the fund’s very low costs are its true edge. All share classes rank in the U.S. real estate peer group’s cheapest decile, and low turnover equates to few transaction costs.
This simple, well-diversified fund should fare best when markets favor public U.S. real estate and its biggest companies. The strategy holds less cash than most of its active peers, which boosts performance when markets rise but can spell trouble when they fall.
The author or authors do not own shares in any securities mentioned in this article.Find out about Morningstar’s editorial policies.
Vanguard is owned by its funds, which in turn, are owned by their shareholders. With no other parties to answer to and therefore no conflicting loyalties, Vanguard makes decisions, including the decision to keep investing costs as low as possible, with clients' interests in mind.
Vanguard set out in 1975 under a radical ownership structure that remains unique in the asset management industry. Our company is owned by its member funds, which in turn are owned by fund shareholders. With no outside owners to satisfy, we focus squarely on meeting the investment needs of our clients.
Index funds are very popular among investors. They offer a simple, no-fuss way to gain exposure to a broad, diversified portfolio at a low cost for the investor. They are passively managed investments, and for this reason, they often have low expense costs.
Vanguard offers a wide range of investment products and account types, and you can buy Vanguard ETFs with a minimum investment of $1 in your brokerage account. Vanguard is owned by its investors, so it keeps its costs low -- the average Vanguard ETF and mutual fund expense ratio is 82% less than the industry average.
All Vanguard Brokerage clients pay $0 commission to trade ETFs (exchange-traded funds) and stocks online. You also have access to more than 160 no-transaction-fee mutual funds from Vanguard and more than 3,000 funds from other companies.
Vanguard Real Estate Index: Performance Highlights
Solid contributions from specialized REITs powered returns over that span, but the fund's very low costs are its true edge. All share classes rank in the U.S. real estate peer group's cheapest decile, and low turnover equates to few transaction costs.
REIT ETFs provide quality professional management – experts choose the REITs to invest in – and offer broad diversification geographically and among real estate asset classes. For retail investors saving for retirement or for other long-term goals, REIT ETFs are often the best way to own REITs.
The average price target for Vanguard Real Estate Index Fund Admiral Shares is $131.41. This is based on 159 Wall Streets Analysts 12-month price targets, issued in the past 3 months. The highest analyst price target is $148.23 ,the lowest forecast is $117.10.
Vanguard funds are known for having the lowest expense ratios in the industry. This allows investors to save money on fees and helps their returns over the long run. Vanguard is the largest issuer of mutual funds in the world and the third-largest issuer of exchange-traded funds (ETFs), ranked by assets as of May 2024.
Our unique structure directly benefits our fund shareholders, as we can consistently pass along profits to reduce the cost of investing for clients. Lower costs enable investors to capture greater portions of their investments' gross returns.
With a sound and sensible investment approach as a foundation, Vanguard began its march to industry leadership with a series of audacious strokes—introducing the first index mutual fund, adopting a commission-free distribution system, and internalizing fixed income management.
The bottom line is that even billionaires recognize the wealth-creation potential of low-cost index funds. Even if you're an active investor in individual stocks -- like Buffett and Dalio are -- rock-solid index funds like these four can help form an excellent backbone for your portfolio.
While index funds do have benefits, they also have drawbacks to understand before investing. An index fund tends to include both high- and low-performing stocks and bonds in the index it's tracking. Any returns you earn would be an average of them all.
The rise of index funds has provided millions of Americans with a cheaper and more efficient way to invest. With more than $23 trillion in assets between them, BlackRock Inc., Vanguard Group Inc.and State Street Corp. have become the top shareholders in many US-listed companies.
While both institutions offer robo-advisors, Vanguard's Personal Advisor Services, which is available to clients who can meet a $50,000 account minimum, offers a little more hands-on investment guidance and assistance with portfolio construction. Vanguard also has slightly lower expense ratios on its index funds.
Vanguard's mission is to "take a stand for all investors, to treat them fairly, and to give them the best chance for investment success."6 It prides itself on its stability, transparency, low costs, and risk management. It is a leader in offering passively managed mutual funds and ETFs.
Key Points. The S&P 500 has been soaring in 2024. Despite a historically high 10-year cyclically adjusted P/E ratio, the Vanguard S&P 500 ETF still screens as a buy.
Introduction: My name is Aracelis Kilback, I am a nice, gentle, agreeable, joyous, attractive, combative, gifted person who loves writing and wants to share my knowledge and understanding with you.
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