Real estate investment trusts (REITs) struggled last year as rising interest rates made these types of investments appear risky given the debt loads that they often carry. But with inflation showing signs of slowing down finally, there's the potential for interest rate increases to also slow down and they may even come to an end entirely this year.
Unsurprisingly, as a result of these developments, over the past three months, the Vanguard Real Estate Index Fund (NYSE Arca:VNQ) has been picking up steam, rising by 14%. The S&P 500 is up 11% over the same time frame.
The index fund also offers investors a relatively high yield of 3.9%. Plus, its modest expense ratio of 0.12% also makes it a relatively cheap exchange-traded fund (ETF) to hold in your portfolio. The fund holds 167 stocks in its portfolio with a median market cap of $24.4 billion and averages a price-to-earnings multiple of 24.7.
With a variety of REITs in its portfolio, including those focused on healthcare, industrial, retail, and residential spaces, investors can get broad exposure to various different industries with this ETF. Prologis (NYSE:PLD), American Tower (NYSE:AMT), and Equinix (NASDAQ:EQIX) are among the fund's topo holdings, each accounting for more than 4% of the total weight.
For investors who want to collect an above-average yield and potentially take advantage of some beaten-down REITs at reduced valuations, the Vanguard Real Estate Index Fund can make for a good addition to your portfolio as there could be better days ahead for REITs.
