But there are a couple of funds with different investment objectives you might want to consider as well.
The Schwab U.S. REIT ETF (NYSEMKT: SCHH) has about $5 billion in assets and, like the Vanguard fund, tracks a weighted index of REITs. It actually has a lower expense ratio -- just 0.07%.
The key difference is that the Schwab fund excludes communications REITs like American Tower. Some experts feel that these would be more appropriately classified as telecommunications stocks, not REITs. The two largest publicly traded REITs are both telecom REITs, so this makes a big difference in the investment dynamics of a weighted index fund.
If you’re looking for exposure to real estate that extends beyond the U.S., the iShares Global REIT ETF (NYSEMKT: REET) could be right for you. It takes a similar approach to the Schwab ETF in terms of excluding telecom REITs, but it also includes some foreign REITs. With a 0.14% expense ratio, you’re not paying too much more for the added diversification.
Is the Vanguard REIT Fund the best option?
Either version of the Vanguard REIT fund can be a great choice for investors who want to invest in REITs. Both funds add portfolio diversification as well as the excellent dividends and growth potential. And they don't require the research or risk involved in choosing individual stocks.
But is the Vanguard fund the best? That depends on your investment goals and risk tolerance.
There are good arguments for the other two funds I mentioned. But if you're okay with telecommunications REITs and don’t care about international real estate exposure, the Vanguard REIT fund could be the best fund for you.