Here's How to Pick a Real Estate ETF | Chaikin Analytics

How to Pick a Real Estate ETF

You have decided to take the plunge into a Real Estate ETF! You know that this asset class would help you diversify your portfolio, and add some interesting performance characteristics. You also know that Real Estate has underperformed recently. So there could be risk as well as diversification.

ETFs make this process easy. While in earlier times, you used to have to find a mutual fund or an exotic instrument to gain Real Estate exposure, now you can just purchase an Real Estate ETF, or any ETF, much like a stock. Like any ETF, you should look at the following items:

1. Recent Returns (Performance) – While past performance is no guarantee of future performance, it does give you an idea of which ETFs have been able to weather this recent market volatility. 

2. Cost (Expense Ratio) – How much does it cost you to hold this Real Estate ETF?

3. Concentration of Holdings – In general, a more diverse set of holdings lowers risk. At the same time, it may also lower returns.

4. Size of ETF – How big is the ETF in dollars under management. This is important to see if it trades enough, and has no liquidity issues.

So let’s take a look at the results:


The market has not been kind to the Real Estate ETFs! Only one ETF out of twenty three posted a positive 6 month return.

The iShares (ITB) is the top performing Real Estate ETF for the past six months. One concern though – performance is a measure of past activity. The Power Bar can give you an indication of future performance, and right now far more stocks in the ETF are bearish than bullish. The only ETF that doesn’t reflect that overall condition is the Powershares (PKB). So let’s focus our search on these two ETFs.

Expense Ratio:

The ITB has a modest Expense Ratio of 0.43. This means that it costs less than half of 1 percent to hold this Real Estate ETF for a year.

The PKB is a little more expensive at 0.62.

Concentration of Holdings:

The ITB is fairly concentrated with the top 7 holdings representing over 50% of the makeup of the fund.

On the other hand, the top 7 holdings of the PKP is about 34%. This is a more diversified portfolio.

Size of the Real Estate ETF:

The ITB is much larger. It currently has more than $1.6 billion compared to the smaller PKB ($330M).  It trades more frequently, and so in a rough market when you want to sell your shares, it should be easier.


Both ETFs are fine choices. The ITB sports a better historical performance, lower fees, and better liquidity. The PKB, on the other hand, looks like it may be positioned for better performance in the future, and it has much better diversification.  Now that you have the information at your fingers, it is up to you to choose!

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