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International REIT Offers Diversification

This week‚??s ETF Talk introduces an international real estate investment trust (REIT) fund, the¬†Vanguard Global ex-U.S. Real Estate ETF (VNQI),¬†which complements the domestic REIT we featured last week.

While last week I suggested that domestic REITs might be a good safe haven in a potential market downturn, this week I‚??m looking ahead to 2015. The¬†same reasoning for investing in domesic REITs¬†that I shared last week also applies to international REITs. The only difference here is that international REITs typically have not run up in price.

I think that international markets are due for a bounce next year, so this REIT could be a good way to profit from a beaten-down investment as we move forward. Like its domestic partner, VNQ, VNQI has outperformed the rest of its market this year.

Although VNQI is down 1.1% this year, that performance actually is stronger when compared to the beating foreign markets have taken during the same period. REITs are a relatively attractive investment in a falling market, so it only makes sense that VNQI, while it has suffered alongside emerging markets, has not absorbed as much pain as other international assets. Like other Vanguard funds, this ETF has a low expense ratio, clocking in at 0.27%.

If foreign markets reverse direction and move to the upside in 2015, then VNQI stands to benefit along the way. And, with an attractive dividend yield of 4.29%, you have the opportunity to get both share price appreciation and a solid income stream.

VNQI‚??s top 10 holdings comprise 22.61% of its assets. These include Mitsubishi Estate Co. (MITEF), 3.4%; Mitsui Fudosan Co. Ltd. (MTSFF), 3.11%; Unibail-Rodamco SE (UNBLF), 2.82%; Cheung Kong Holdings Ltd. (CHEUF), 2.62%; and Sun Hung Kai Properties Ltd. (SUHJF), 2.55%.

This fund is an inexpensive way to get exposure to international real estate markets. If this prospect interests you, you may want to check out Vanguard Global ex-U.S. Real Estate ETF (VNQI).

If you want my advice about buying and selling specific ETFs, including appropriate stop losses, in invite you to subscribe to my Successful ETF Investing newsletter. As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an e-mail. You just may see your question answered in a future ETF Talk.

In case you missed it, I encourage you to read my e-letter column from last week on Eagle Daily Investor about VNQ, the U.S. domestic REIT fund. I also invite you to comment in the space provided below my Eagle Daily Investor commentary.

Written By

Doug Fabian is the editor of Successful Investing and High Monthly Income, and is the host of the syndicated radio show, "Doug Fabian's Wealth Strategies." Taking over the reigns from his dad, Dick Fabian, back in 1992, Doug has continued to uphold the reputation of the newsletter as the #1 risk-adjusted market timer as ranked by Hulbert‚??s Investment Digest. For more than 30 years, Successful Investing (formerly the Telephone Switch Newsletter) has produced double-digit annual gains. Doug has become known for his expert knowledge and timely use of innovative tools like Exchange Traded Funds, bear funds and Enhanced Index funds to profit in any market climate.