Quick refresher:
REIT is Real Estate Investment Trust. REITS may have dozens or even hundreds of “properties that make up the one trust or stock type.”
ETF Is Exchange Traded Funds. ETFs usually have “100 or more separate stocks that trade together as one fund.”
REIT exchange-traded funds (ETFs) combine both the REIT and the ETF into one dividend paying fund, made up of both properties, and different stock shares.
Stock Talk still favors individual strong balance sheet and sector specific REITs. The kind that holds recession-resistant and tariff-proof essentials, like hospitals, senior housing, medical offices, data centers, cell towers, or farmland. This is basic infrastructure that people rely on no matter the economic weather. These aren’t flashy, but neither is plumbing, and you’d miss that terribly if it vanished tomorrow.
There is a definitely a place for investors to put their money into REIT ETFs in your portfolio.
Here we take you through five surprising facts about REIT ETFs that many investors overlook.
Key Takeaways
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REIT ETFs have historically provided strong returns and inflation protection through real estate exposure and rental income.
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Beyond traditional real estate, REIT ETFs offer exposure to high-growth sectors like healthcare properties, data centers, and telecom infrastructure.
5 Surprising Facts About REIT ETFs
REIT ETFs let you invest in a diversified basket of companies that own and manage income-producing properties, from offices to data centers. These funds trade like stocks and typically offer steady dividend income since REITs must distribute most of their profits to shareholders.
1. REITs Have Often Outperformed the S&P 500 Over the Long Term
While REITs have historically outpaced the S&P 500 index (25- and 50-year REIT returns are often better than the stock market), they’ve struggled comparatively in the past decade, hit hard by both the pandemic and rising interest rates. This is a note to not buy it and forget it, you have to check in on your REIT from time to time especially in a rising interest rate environment.
Not all REIT ETFs are created equal. Specialized sectors like self-storage (up 10.9% in 2024) and data centers (up 15.8%) have shown more resilience than other sectors. It helps to have the right assets. Often the assets are usually in supply-constrained areas.
REIT ETFs, help you navigate these sector differences by providing broad exposure across property types. Below, you can see the success for REITs in specific sectors, which gives you an idea of the returns of ETFs that hold REITs invested in those areas.
2. REIT ETFs Are Striking for Their Corporate Tax Efficiency
Investing in REIT ETFs can be more tax-efficient than directly owning individual REITs or physical real estate. Because REIT ETFs are structured as pass-through entities, they avoid double taxation at the corporate level, allowing most of their income to be distributed as dividends to you.
3. Many REIT ETFs Are “Top-Heavy”
Another interesting aspect of REIT ETFs is their “top-heavy” structure, where a small number of large REITs dominate the portfolio’s holdings. For instance, major players like American Tower Corp. (AMT) and Prologis Inc. (PLD) often comprise a significant part of these funds. This could mean your returns depend heavily on how these few large companies perform. Better to stay clear of top-heavy ETFs. It is very easy to see what percentage of each company makes up your potential ETF overall mix.
4. “Smart Beta” Strategies Are Gaining Popularity in REIT ETFs
Here are two Real Estate Investment Trust (REIT) ETFs that employ smart beta strategies and have shown strong recent performance based on available data. Please note that “done well” is based on recent past performance, which is not indicative of future results. The performance data cited is the most recent available in the provided information for these types of funds.
A. Invesco S&P 500 Equal Weight Real Estate ETF (RSPR)
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Strategy Type: Equal Weighting. This smart beta strategy assigns the same weight to each holding in the portfolio, regardless of its market capitalization. This approach avoids the concentration risk often found in market-cap-weighted indexes where a few large companies can dominate performance.
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Recent Performance: RSPR reported a 1-year total return of 23.19% as of August 30, 2024 (Source 1.3). Currently priced at $35. Dividend Yield is 2.59%
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Why it fits “Smart Beta”: Equal weighting is a well-established smart beta strategy that aims to provide broader exposure across the sector and potentially benefit from the performance of smaller and mid-sized companies that might be underrepresented in cap-weighted funds.
B. JPMorgan Realty Income ETF (JPRE)
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Strategy Type: Factor-Based (Quality/Income). This ETF seeks to track the J.P. Morgan U.S. Quality Real Estate Securities Index, which is a proprietary, rules-based index. This suggests a focus on specific factors, likely quality characteristics and income generation, to select and weight its holdings.
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Recent Performance: JPRE reported a 1-year performance of 15.30% as of April 30, 2025 (Source 2.3). Currently priced at < $50. Dividend yield is 2.30%
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Why it fits “Smart Beta”: Rules-based strategies that screen and weight securities based on factors other than market capitalization, such as quality metrics or income potential, are characteristic of smart beta investing. This ETF aims to provide exposure to higher-quality, income-producing U.S. REITs.
Smart beta strategies are an investment approach that combines elements of passive index investing and active management. Instead of simply tracking an index based on market cap, these funds weight their holdings based on dividend yield, financial health, or growth potential.
This approach often cuts down on your risk by focusing on those characteristics that have historically led to better performance.
5. REIT ETFs: Unusual and Unexpected Real Estate Sectors
The same goes for newer sectors where you can put your capital. Today’s REIT ETFs don’t just own shopping malls and apartment buildings—they’re invested in data centers that power cloud computing, cell tower networks that connect our phones, and self-storage facilities that are remarkably profitable. For example, healthcare REITs are up 33% in 2024, while specialty REITs have gained over 50%, showing how these newer sectors are changing the real estate landscape.
The Bottom Line
While these funds make real estate investing as easy as buying a stock, smart investors know to look under the hood. For investors wanting real estate in their portfolio without the headaches of being a landlord. By putting their money dividend producing REITs & REIT ETFs offer an attractive option. Cash flow is still king, and dividends are still their queen!
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