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00:00 – Intro
0:49 – Background Information
1:38 – My REIT Fund Criteria (REIT ETF Screening)
3:40 – My #1 REIT ETF: VNQI
4:28 – Screening Through REIT CEFs
7:35 – Top 2 REIT CEFs: RQI & RNP
8:55 – Best REIT Investments: VNQI +RQI
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LINKS & RESOURCES
Here are the main sources I used for researching these funds:
ETFDB.com: https://etfdb.com/etfs/sector/real-estate/
CEFCONNECT.com: https://www.cefconnect.com/closed-end-funds-screener
The difference between closed-end funds and open-end funds (why CEFs are AWESOME):
Learn about why REITs are so powerful within a Roth IRA:
The referenced article covering RNP and RQI on SeekingAlpha.com:
https://seekingalpha.com/article/4353078-closed-end-funds-2-reit-funds-worth-look
Get started with investing in these funds on Robinhood or M1 Finance:
Robinhood: http://join.robinhood.com/tylerm27 (Get a free stock up to $500!)
M1 Finance: https://m1.finance/apNm3hKCZsWC (Get $10 free!)
Interested in camera stuff? Here’s the equipment I use to shoot my videos:
https://amzn.to/3jE8Ktp
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#REITs, or Real Estate Investment Trusts, are one of my favorite investments. They allow you to invest in real estate at minimal costs – and of course, they offer higher dividend yields than the majority of other stocks on the market.
But, I’m all for diversification, which means I lean towards ETFs and Index Funds over individual stocks. For long term investments, like the REIT allocation in my Roth IRA, I want to make sure that the ETFs I select are going to hold up over the years. So in this video, I’m exploring REIT funds (which includes both ETFs and CEFs) to find the REIT investments that will give me the highest yield and the best chance for capital appreciation.
I’m starting with ETFs, which are the standard fund investment. Using ETFDB.com, which is one of my favorite resources, I’m going to whittle down from 44 REIT ETFs to my number 1 choice. In order to do this, I’m using the following criteria:
• Dividend yield over 5% – Again, I’m primarily investing in REITs for the dividend yield. So, I want to make sure my REIT investment delivers an above average yield as would be expected from the category.
• Positive returns over last 5 years – REITs got absolutely crushed by COVID. This means there are good buying opportunities, but a lot of REITs will also have poor returns when looking at recent price history. I’m looking back at least 5 years to find the funds that have effective methodologies, suggesting that they will keep up with the returns of the market in the future and can ensure me a mostly smooth ride along the way.
With these 2 criteria, we’re already down to 6 ETFs. Two of these are mortgage REITs, or mREITs, which I am not interested in (I explain why in the video). So, that leaves us with just 4. And when comparing the number of holdings, dividend yield, expense ratios and long term price performance, VNQI, the Vanguard Global Ex-US REIT Index Fund takes the cake. This is my top pick for a REIT ETF – but it doesn’t hold ANY U.S. stocks. Fortunately, CEFs will fix this for us.
CEFs, or closed-end funds, offer several benefits over other types of funds, which I explain in detail in my previous video. At CEFCONNECT.com, we have just 8 funds to look through. Most of them have lackluster performance, leaving us with just 3 worthy candidates.
Of the 3, one of the funds has historically paid out huge returns of capital with each distribution. This is a red flag for me for many reasons – so I’m eliminating this one. The last two funds, RNP and RQI, look pretty similar. So, I’m breaking down the differences between the two to find the best option.
Ultimately, I chose RQI because it has a similar yield, similar performance and similar costs to RNP – but, it’s 100% allocated to REITs, whereas RNP is diluted with preferred stocks from other industries. I’m going for a pure REIT investment here, which is why I made this call – but, that’s not to say RNP is a bad investment! It may be perfect for investors looking to diversify beyond REITs.
By combining #RQI and #VNQI, I’m estimating an 8.5% annual dividend yield with a 1.5% expense ratio. With over 800 stock holdings between the two, I’m pretty satisfied here!
What do you think? Let me know how you’re allocating to REITs within your portfolio!
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DISCLAIMER: NOT FINANCIAL ADVICE.
The content in this video should not be used as the basis for any investment decision, as it is for entertainment purposes only. Additionally, some of the links contained in this description are affiliate links. I may earn a commission via Amazon, M1 Finance or Robinhood should you choose to purchase or sign up at the links provided.