Are REIT ETFs a good investment?

REIT ETFs can be good investments. They provide investors with diversified exposure to the real estate sector, which has historically delivered attractive total returns. REITs have outperformed stocks over the long term. In addition, REITs are good inflation hedges and provide dividend income.

What is the largest REIT ETF?

Vanguard Real Estate ETF is the largest REIT ETF, with more than $35 billion in assets under management as of early 2026.

Are REITs still a good investment?

REITs have historically been very good investments over the long term. According to our data on REITs versus stocks, REITs have outperformed stocks over longer periods (20+ years). While past success does not guarantee similar returns in the future, REITs could still be a good investment. Falling interest rates, rising demand for certain property types, and dividend income could enable REITs to continue producing attractive returns for investors.

What are the top 5 largest REITs?

The five largest publicly traded REITs by market cap in early 2026 were:Welltower: $135 billion.Prologis: $127 billion.Equinix: $84 billionAmerican Tower: $80 billion.Simon Property Group: $64 billion.

Do REIT ETFs offer capital appreciation or mainly income?

REIT ETFs offer both capital appreciation and income. While REITs pay out the bulk of their taxable income in dividends, they use retained cash flow and other capital sources to grow their portfolios. Those investments in expanding their portfolios through acquisitions and development projects increase their income, enabling REITs to raise dividends. This growth enables REITs to deliver capital appreciation.

Does REIT ETF pay dividends?

Yes, REIT ETFs pay dividends. Most REITs pay dividends, which these funds collect and distribute to their investors, usually quarterly.

How is a REIT ETF different from investing in individual REITs?

A REIT ETF provides broad exposure to a range of REITs in a single fund. That differs from investing in individual REITs, which only provide exposure to the underlying REIT.

Investing in REIT ETFs

A closer look at some of the best REIT ETFs.

By Matthew DiLallo – Updated Feb 9, 2026 at 2:36 PM EST | Fact-checked by Frank Bass

Key Points

REIT ETFs offer sector-wide exposure.
Investing in REIT ETFs helps diversify risk better than investing in single REITs.
REIT ETFs, like VNQ and ICF, vary in expense ratios and dividends yields.

Congress created real estate investment trusts (REITs) in 1960 to enable anyone to invest in wealth-creating commercial real estate. Exchange-traded funds (ETFs) have since made it even easier to invest in REITs. REIT ETFs allow anyone to invest broadly across the REIT sector to quickly add diversified real estate exposure to their portfolio.

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An infographic defining and explaining real estate investment trust (REIT) exchange-traded funds (ETFs). — Image source: The Motley Fool.

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Here's a closer look at how these two investment vehicles can combine into an easy way to start investing in real estate.

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Data source: ETFdb and YCharts. Performance and AUM data as of Feb. 9, 2026.

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2. iShares U.S. Real Estate ETF

The iShares U.S. Real Estate ETF invests in domestic real estate stocks and REITs. The ETF, managed by BlackRock, had more than 60 holdings as of early 2026, led by the following five:

Welltower: 9.7% portfolio weighting
Prologis: 9.2%
Equinix: 5.0%
Simon Property Group (SPG -1.40%): 4.8%.
Realty Income (O -2.12%): 4.4%

Those are five of the largest REITs, operating across several property types, including industrial, net lease, data centers, and self-storage. Overall, the ETF's 10 largest holdings make up over 50% of its portfolio, providing investors with similar diversification to that of Vanguard's ETF, even though it has fewer holdings.

One drawback of this REIT ETF is its expense ratio. At 0.38%, it's well above the industry average, so it has slightly underperformed its benchmark over the years as the higher fee has eaten into its returns.

The higher fee also eats into the REIT ETF's dividend income. It has a 2.4% dividend yield (as of early 2026, over the trailing 12-month period).

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These ETFs make it easy to invest in REITs

REITs have historically generated attractive total returns for investors by providing them with above-average dividend income and price appreciation. With so many great REITs to choose from, it can be hard for investors to determine which are best for their portfolio. That's where REIT ETFs can help. They make it easy to invest in the sector by providing broad exposure to the leading REITs. Although most REIT ETFs have similar top holdings, the best ones offer unique spins, giving investors several excellent options.

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FAQ on REIT ETFs

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About the Author

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

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@MatthewDiLallo

Charles Schwab is an advertising partner of The Ascent, a Motley Fool company. Matt DiLallo has positions in American Tower, Crown Castle, Equinix, Prologis, and Public Storage and has the following options: long January 2026 $170 calls on American Tower and short January 2026 $175 calls on American Tower. The Motley Fool has positions in and recommends American Tower, Charles Schwab, Crown Castle, Equinix, Prologis, and Vanguard Real Estate ETF. The Motley Fool recommends the following options: long January 2026 $180 calls on American Tower, long January 2026 $90 calls on Prologis, short January 2026 $185 calls on American Tower, and short June 2024 $65 puts on Charles Schwab. The Motley Fool has a disclosure policy.

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5. iShares Select U.S. REIT ETF

The iShares Select U.S. REIT ETF is another REIT ETF managed by BlackRock. It takes a slightly different approach to investing in REITs, focusing on large real estate companies that dominate their respective property categories. As a result, it has a concentrated portfolio of 30 REITs.

However, these 30 include some familiar names, led by:

Prologis: 8.5%

Welltower: 8.1%

Equinix: 7.9%

American Tower: 7.5%

Simon Property Group: 6.2

Overall, its top 10 holdings made up more than 60% of its portfolio as of early 2026.

Because the ETF takes a more active approach to REIT investing, it charges a relatively high expense ratio of 0.32%. It also offered a lower dividend yield (2.9% on a trailing 12-month basis). It's best for investors who want to focus on the dominant REITs without limiting themselves to only those in the S&P 500.

How REIT ETFs Work

REIT ETFs work by pooling investor capital to invest broadly across REIT sectors. Many REIT ETFs track a common REIT index by investing in the REITs held by that index to match its returns. Other ETFs take a more active approach, investing in REITs that their management teams believe will deliver the highest returns.

REIT ETFs own equity in the REITs, entitling them to any capital appreciation and dividend income. Most REIT ETFs distribute dividends to investors each quarter.

Benefits and drawbacks of investing in REIT ETFs

Investing in REIT ETFs has its share of pros and cons. Some of the benefits include:

Diversification: They offer broad diversification across the entire REIT sector, which can help lower your portfolio's risk.

Income: REITs pay dividends, which REIT ETFs distribute to investors each quarter.

Capital appreciation potential: REITs can deliver price appreciation as they grow their portfolios, earnings, and dividends.

On the other hand, REIT ETFs have some cons, such as:

Underperformance potential: REIT ETFs can underperform the share prices of the top REITs.

Costs: REIT ETFs charge investors a management fee (expense ratio), which can eat into returns.

Investing in REIT ETFs

A closer look at some of the best REIT ETFs.

Key Points

2. iShares U.S. Real Estate ETF

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FAQ on REIT ETFs

Are REIT ETFs a good investment?

What is the largest REIT ETF?

Are REITs still a good investment?

What are the top 5 largest REITs?

Do REIT ETFs offer capital appreciation or mainly income?

Does REIT ETF pay dividends?

How is a REIT ETF different from investing in individual REITs?

Best REIT ETFs

3. Schwab US REIT ETF

4. State Street Real Estate Select Sector SPDR ETF

5. iShares Select U.S. REIT ETF

How REIT ETFs Work

Benefits and drawbacks of investing in REIT ETFs

What to Consider Before Investing in REIT ETFs

Related investing topics

These ETFs make it easy to invest in REITs

FAQ

1. Vanguard Real Estate ETF

2. iShares U.S. Real Estate ETF