What's the difference between a REIT ETF and a REIT mutual fund?

Both a REIT ETF and a REIT mutual fund hold a portfolio of publicly traded REITs. However, a REIT ETF is an exchange-traded fund (ETF) that trades on a major stock exchange, so investors can purchase shares through their brokerage accounts. On the other hand, investors must typically purchase many REIT mutual funds directly from the sponsor or from a financial advisor.

What's the difference between a REIT index fund and a REIT mutual fund?

A REIT index fund is a passive investment that holds the same securities as a major REIT index. It provides investors with returns that match the underlying index minus the fees it charges. REIT mutual funds have an active manager aiming to deliver returns that outpace an underlying REIT index, even after fees are factored in.

Are REIT mutual funds a good investment?

REIT mutual funds can be a good investment. These professionally managed funds enable anyone to invest broadly in real estate. They can help you diversify your portfolio and generate passive dividend income.

Does Vanguard have a REIT mutual fund?

Yes, Vanguard offers a REIT mutual fund: Vanguard Real Estate Index Fund (NASDAQMUTFUND: VGSLX). It has a $3,000 minimum investment. Vanguard also offers a similar REIT ETF: Vanguard Real Estate ETF (NYSEMKT: VNQ). The ETF has a lower minimum investment of only $1.

How are REIT mutual funds taxed?

REIT mutual funds held in a retirement account would benefit from the tax advantages of those accounts (tax-deferred in a traditional IRA and tax-free in a ROTH IRA). REIT mutual funds held in a non-retirement account would have the following tax implications:Most REIT dividend payments are non-qualified dividends. As such, the IRS taxes them at an investor's ordinary income tax rate.Additionally, most REIT mutual funds will make capital gains distributions when they record gains from the sale of REIT shares they own. An investor would pay capital gains taxes on these gains (either short-term or long-term).

How can REIT mutual funds diversify an investment portfolio?

REIT mutual funds can diversify your investment portfolio by adding exposure to real estate, which tends to have a lower correlation with the stock market. Studies have found that investors should hold between 5% to 15% of their portfolio in REITs for optimal diversification, which they can easily do by investing in a REIT mutual fund.

Best REIT Mutual Funds for 2026 and How to Invest

These REIT mutual funds have a long history of delivering superior performance for investors.

By Matthew DiLallo – Updated Apr 14, 2026 at 1:28 PM EST | Fact-checked by Frank Bass

Key Points

Real estate mutual funds offer broad real estate sector exposure through a single fund.
Historical data shows that the top real estate mutual funds generally outperform their benchmarks and offer steady income generation.
Top REIT mutual funds include names like Baron Real Estate Fund and Cohen & Steers Real Estate Securities Fund.

Real estate mutual funds make it easier to invest broadly in real estate. The sector has historically been a good investment. It has traditionally delivered competitive long-term returns compared to stocks, generally produces steady income, and is an excellent hedge against inflation. Most financial advisors recommend that their clients have some exposure to commercial real estate in their portfolios.

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An infographic explaining three main advantages to investing in real estate investment trust (REIT) mutual funds. — Image source: The Motley Fool.

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There are many ways to invest in real estate. One of the simplest ways to gain broad exposure to the entire sector is through mutual funds that invest in real estate investment trusts (REITs).

A REIT mutual fund aims to deliver above-average performance compared to an index fund focused on REITs or a REIT exchange-traded fund (ETF). It also offers the simplicity of a single investment rather than buying and managing shares of multiple REITs. Here's a look at some of the best REIT mutual funds to buy.

Five top REIT mutual funds for 2026

Hundreds of mutual funds own shares of mortgage and equity REITs, providing investors with lots of potential REIT mutual fund investment options. However, some REIT mutual funds have consistently produced above-average returns over the years. Here's a look at five of the top REIT mutual funds investors should consider.

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Data source: Yahoo! Finance. Data current as of April 14, 2026. REIT = real estate investment trust.
REIT Mutual Fund	Assets Under Management	Description
Baron Real Estate Fund (NASDAQMUTFUND:BREFX)	$2.3 billion	The fund invests broadly in real estate, focusing on growth.
Cohen & Steers Real Estate Securities Fund (NASDAQMUTFUND:CSEI.X)	$8.7 billion	This fund seeks to achieve a total return by investing in real estate securities.
PIMCO Real Estate Real Return Strategy I (NASDAQMUTFUND:PRRSX)	$503 million	This fund aims to maximize the real return.
Nuveen Real Estate Securities Select Fund (NASDAQMUTFUND:TIRE.X)	$2.8 billion	The fund invests at least 80% of its assets into companies that own significant real estate.
Principal Real Estate Securities R5 (NASDAQMUTFUND:PREPX)	$6.4 billion	This fund seeks to generate a total return by investing in real estate.

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1. Baron Real Estate Fund

NASDAQMUTFUND: BREFX

Baron Select Funds - Baron Real Estate Fund

Today's Change

(-2.10%) $-0.83

Current Price

$38.71

Key Data Points

Day's Range

$38.71 - $38.71

52wk Range

$38.71 - $38.71

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The Baron Real Estate Fund (BREFX -2.10%) owns a diversified portfolio of real estate businesses. It focuses on companies with growth potential.

As of mid-2026, the fund held shares of about 40 real estate companies, led by the following five:

Welltower (NYSE:WELL): 7% of the fund's assets.
Equinix (NASDAQ:EQIX): 6.8%
Prologis (NYSE:PLD): 4.7%
Brookfield Corporation (NYSE: BN): 4.2%
Toll Brothers (NYSE:TOL): 4%

Three of the mutual fund's top five holdings are REITs. Meanwhile, it has meaningful overall exposure to the sector. Data center REITs comprise 9.8% of its assets, healthcare REITs 9.7%, industrial REITs 4.7%, retail REITs 3.8%, and self-storage REITs 2.8%. Most of its other holdings own significant amounts of real estate, which accounts for 41.7% of its assets.

One thing that stands out about the Baron Real Estate Fund is its performance. Over the past decade, the fund has delivered an average annualized return of 10.3%, significantly outpacing the MSCI U.S. REIT Index's 4.3% annualized return. The fund also has a four-star rating from Morningstar (NYSE:MORN).

The only potential negative is its expense ratio of 1.31%, which is a bit high for a mutual fund. However, given its long track record of outperformance, it could be worth the price.

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2. Cohen & Steers Real Estate Securities Fund

NASDAQMUTFUND: CSEIX

Cohen & Steers Real Estate Securities Fund, Inc.

Today's Change

(-1.62%) $-0.29

Current Price

$17.62

Key Data Points

Day's Range

$17.62 - $17.62

52wk Range

$17.62 - $17.62

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The Cohen & Steers Real Estate Securities Fund (CSEIX -1.62%) seeks to achieve a total return (income plus capital appreciation) by investing in real estate securities such as common stock, preferred stock, and other equity and debt securities issued by real estate companies. The fund invests in REITs and REIT-like entities.

The REIT mutual fund had 45 holdings as of mid-2026, led by the following five:

Welltower: 12.9% of the fund's holdings
Digital Realty (NYSE: DLR): 7.8%
Crown Castle (NYSE:CCI): 7.1%.
American Tower (NYSE: AMT): 5.7%
Prologis: 4.5%

The REIT offers investors diversified exposure to the entire REIT sector. Its top five subgroups are healthcare (18.8% of the fund's holdings), telecommunications (14.9%), data centers (11.9%), industrial (8.2%), and apartment (5.7%).

The fund has a solid performance track record. Over the past decade, it has delivered an average annual total return of 8.2%, including its sales charge. That has outpaced the 6.8% annualized total return of the FTSE Nareit Equity REIT Index.

It also boasts a five-star overall rating from Morningstar. The fund has an expense ratio of 0.84%, which could be worth it for investors seeking a highly rated REIT mutual fund with an excellent performance track record.

3. PIMCO Real Estate Real Return Strategy Fund

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NASDAQMUTFUND: PRRSX

PIMCO Funds - PIMCO RealEstateRealReturn Strategy Fund

Today's Change

(-1.92%) $-0.59

Current Price

$30.15

Key Data Points

Day's Range

$30.15 - $30.15

52wk Range

$30.15 - $30.15

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The PIMCO Real Estate Real Return Strategy Fund (PRRSX -1.92%) takes a unique approach. It provides exposure to a broad REIT index, collateralized by a portfolio of Treasury Inflation-Protected Securities (TIPS). That strategy enables it to provide a double real inflation hedge.

The mutual fund provides broad exposure to the real estate sector, led by the following REIT types:

Healthcare: 20.5% of its holdings
Diversified: 19.3%
Warehouse/Industry: 13.8%
Apartments: 11.9%
Storage: 7.8%

In addition to holding REITs, the fund has long and short positions in several fixed-income securities. It has a reasonable expense ratio of 0.74%.

The REIT mutual fund's unique approach has paid off for its investors over the years. It has grown the value of a $10,000 investment made at its inception in 2003 into over $85,000. That's significantly more than the over $54,700 you would have made by investing the same amount in a fund tracking the Dow Jones U.S. Select REIT Total Return Index.

4. Nuveen Real Estate Securities Select Fund

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NASDAQMUTFUND: TIREX

TIAA-CREF Funds - TIAA-CREF Real Estate Securities Fund

Today's Change

(-1.53%) $-0.30

Current Price

$19.35

Key Data Points

Day's Range

$19.35 - $19.35

52wk Range

$19.35 - $19.35

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The Nuveen Real Estate Securities Select Fund (TIREX -1.53%) seeks to deliver a favorable total long-term return by investing in the real estate industry. It typically invests up to 80% of its assets in real estate securities, including companies that own significant real estate assets, such as REITs.

It will also invest up to 15% of its assets in foreign companies. The fund has the flexibility to invest up to 20% in the debt or equity of companies unrelated to the real estate sector. The fund doesn't invest directly in real estate or private REITs.

As of mid-2026, the fund held 45 positions, led by the following five:

Welltower: 11.2%of its net assets.
Prologis: 7.2%
Equinix: 7.1%
Digital Realty: 5.1%
Simon Property Group (NYSE:SPG): 4.4%

The fund has a solid performance track record. Over the past decade, it has delivered a 5.8% average annual total return, outpacing the 5.6% average annual total return of the FTSE Nareit All Equity REITs Index. The fund boasts a four-star rating from Morningstar over the last 10 years and has a reasonable expense ratio of 0.62%.

5. Principal Real Estate Securities R5

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NASDAQMUTFUND: PREPX

Principal Funds, Inc. - Real Estate Securities Fund

Today's Change

(-1.56%) $-0.46

Current Price

$29.10

Key Data Points

Day's Range

$29.10 - $29.10

52wk Range

$29.10 - $29.10

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The Principal Real Estate Securities R5 (PREPX -1.56%) seeks to generate a total return for investors. It aims to invest at least 80% of its net assets, plus any borrowings for investment purposes, into companies primarily engaged in the real estate industry.

The fund had nearly 40 stock holdings as of early 2026, led by the following five:

Equinix: 9.7% of the fund's holdings
Welltower: 9.4%
American Tower: 8.4%
Ventas (NYSE: VTR): 7%
Prologis: 6.2%

The fund has a solid performance record. Over the past decade, it has delivered a 5.5% average annual total return, edging out the 5.1% average annualized total return of the U.S. REIT Linked Index. The fund has a four-star rating from Morningstar and a 1.06% expense ratio.

How to invest in REIT mutual funds

Here's a step-by-step guide on how to add a REIT mutual fund to your portfolio:

Open your brokerage app: Log in to your brokerage account where you handle your investments.
Search for the stock: Enter the ticker or company name into the search bar to bring up the stock's trading page.
Decide how many shares to buy: Consider your investment goals and how much of your portfolio you want to allocate to this stock.
Select order type: Choose between a market order to buy at the current price or a limit order to specify the maximum price you're willing to pay.
Submit your order: Confirm the details and submit your buy order.
Review your purchase: Check your portfolio to ensure your order was filled as expected and adjust your investment strategy accordingly.

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Benefits and risks of investing in REIT mutual funds

Investing in REIT mutual funds has both pros and cons. Some benefits include:

Diversification: They provide investors with fairly broad exposure to the real estate sector.
Passive investment: They allow you to passively invest in the real estate sector through a professionally managed fund.
Income: Most REITs pay dividends. REIT mutual funds distribute this dividend income to investors.

On the other hand, some drawbacks of investing in REIT mutual funds include:

Costs: Mutual fund managers charge fees to manage these funds, which are typically higher than those of REIT ETFs.
Underperformance: A REIT mutual fund could underperform its benchmark or the top REIT stocks.
Taxes: REIT mutual fund often have more taxable events than a REIT ETF to accomidate redemtions and re-allocate assets. As a result, a REIT mutal fund invstor could owe some capital gains taxes in years they didn't sell any shares.

Should you invest in REIT mutual funds?

REIT mutual funds enable you to invest broadly in the real estate sector. They offer the potential to earn total returns above those of a real estate index fund. The opportunity makes REIT mutual funds a potentially attractive alternative for investors seeking above-average returns without investing directly in individual REITs. They can be a great long-term, core real estate holding.

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FAQ

REIT mutual fund FAQ

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About the Author

Matt DiLallo has been a contributing Motley Fool stock analyst specializing in the energy, industrials, and real estate sectors since 2012. He also covers dividend-paying stocks, pre-IPO companies, ETFs, and other investing topics. He holds an MBA from Liberty University.

TMFmd19

@MatthewDiLallo

Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Best REIT Mutual Funds for 2026 and How to Invest

These REIT mutual funds have a long history of delivering superior performance for investors.

Key Points

Five top REIT mutual funds for 2026

1. Baron Real Estate Fund

Key Data Points

2. Cohen & Steers Real Estate Securities Fund

Key Data Points

3. PIMCO Real Estate Real Return Strategy Fund

Key Data Points

4. Nuveen Real Estate Securities Select Fund

Key Data Points

5. Principal Real Estate Securities R5

Key Data Points

How to invest in REIT mutual funds

Benefits and risks of investing in REIT mutual funds

Should you invest in REIT mutual funds?

Related investing topics

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Index Funds vs. Mutual Funds: Which Should You Choose?

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FAQ

REIT mutual fund FAQ

What's the difference between a REIT ETF and a REIT mutual fund?

What's the difference between a REIT ETF and a REIT mutual fund?

What's the difference between a REIT index fund and a REIT mutual fund?

What's the difference between a REIT index fund and a REIT mutual fund?

Are REIT mutual funds a good investment?

Are REIT mutual funds a good investment?

Does Vanguard have a REIT mutual fund?

Does Vanguard have a REIT mutual fund?

How are REIT mutual funds taxed?

How are REIT mutual funds taxed?

How can REIT mutual funds diversify an investment portfolio?

How can REIT mutual funds diversify an investment portfolio?

About the Author

Read Next

Stocks Mentioned

Premium Investing Services

Five top REIT mutual funds for 2026

Key Data Points

Key Data Points

3. PIMCO Real Estate Real Return Strategy Fund

Key Data Points

4. Nuveen Real Estate Securities Select Fund

Key Data Points

5. Principal Real Estate Securities R5

Key Data Points

How to invest in REIT mutual funds

Benefits and risks of investing in REIT mutual funds

Should you invest in REIT mutual funds?

8 Ways Artificial Intelligence is Being Used in Real Estate

Index Funds vs. Mutual Funds: Which Should You Choose?

Best Real Estate Stocks for 2026 and How to Invest

Best Mutual Funds to Invest In (2026)

REIT mutual fund FAQ

What's the difference between a REIT ETF and a REIT mutual fund?

What's the difference between a REIT ETF and a REIT mutual fund?

What's the difference between a REIT index fund and a REIT mutual fund?

What's the difference between a REIT index fund and a REIT mutual fund?

Are REIT mutual funds a good investment?

Are REIT mutual funds a good investment?

Does Vanguard have a REIT mutual fund?

Does Vanguard have a REIT mutual fund?

How are REIT mutual funds taxed?

How are REIT mutual funds taxed?

How can REIT mutual funds diversify an investment portfolio?

How can REIT mutual funds diversify an investment portfolio?