VNQ is an index fund that invests in U.S. real estate properties by purchasing shares of real estate investment trusts (REITs). The following profile shows that VNQ is an established fund that operates at a low rate of turnover.
The VNQ scorecard (below) reveals a wealthy, experienced index fund that invests in a well-developed market for REITs. The fund may be tax inefficient when cash distributions are taxed as ordinary income. The risks to underperformance are 1) erroneous judgment in management of the portfolio holdings, and 2) generic risks of investing in the real estate market.
The Fund is a registered investment company for tax purposes and issues quarterly dividends. The annual expense ratio is 0.1% and the net assets are valued at approximately $17 billion dollars.
The benchmark Index measures the performance of 85% of the U.S. Equity REIT market (~116 REITs) and is rebalanced quarterly. The equity REITs are diversified among residential and commercial properties.
Real estate is an illiquid asset, but equity REITs are easily traded in the stock market. Equity REITs own and manage real estate. They must receive 75% of income from rents and sales and they must distribute 90% of taxable income to shareholders. Equity REITs earn income by attracting tenants, renewing leases, and financing property purchases/improvements. REIT stocks are typically small and mid-cap sized.
The main investment risks are: 1) concentrated investment in the REITs/real estate industries, and 2) competing interest rates may attract investors away from REITs.
VNQ is a good investment for diversifying your ETF portfolio.