ETF Talk: Real Estate ETFs
ETF Talk has delivered key facts to you during the past couple of months about exchange-traded fund (ETF) sectors that range from some of the world’s most precious resources — from agriculture and precious metal commodities to water. This week’s ETF Talk examines a popular turnaround sector — real estate ETFs. That sector increasingly may be catching your attention as real estate market gyrations persist.
You may be surprised to learn that there are about 30 real estate ETFs, tracking both domestic and international indexes.
One real estate ETF with a performance that may prove notable in the months ahead is the UltraShort Real Estate ProShares (SRS). SRS seeks investment results that are twice the inverse of the Dow Jones U.S. Real Estate Index. That index measures the performance of publicly traded stocks in the U.S. real estate industry. The Ultra Short designation of SRS means that when the Dow Jones U.S. Real Estate Index is down, SRS is up twice that amount, and vice versa.
While this fund may seem like a sure thing when it comes to profiting from the struggling real estate market — you may want to think again. Its quarter-end market price performance, as of March 31, 2008, was down 9.93%. The fund’s price is up 30.79% for the past year. As a result, SRS has not been any utopia for investors seeking to prosper from the miseries of the real estate meltdown.
RWX seeks to closely match the returns of the Dow Jones Wilshire Ex-US Real Estate Securities Index. That index measures the performance of publicly traded real estate securities in countries outside of the United States. After taxes, the fund had a fourth-quarter 2007 loss of -2.34%.
DRW is an ETF that seeks to track the performance of the WisdomTree International Real Estate Sector index. That index tracks the performance of companies in developed markets, outside of the United States and Canada, which pay regular cash dividends on shares of common stock that are in the international real estate sector. Its first-quarter 2008 performance was down 15.41%.
When the real estate market bottoms out, the funds that place long-term bets on its recovery should do well. However, even the UltraShort real estate fund we highlighted is struggling. It shows just how dicey investing in real estate can be — not only for those who buy homes and buildings, but also for the rest of us who might be tempted to delve into real estate ETFs.
Jim Woods is a 30-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor.
His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. Read more about Jim Woods.
