XLRE vs. VNQ: Which Real Estate ETF Is Better for Long-Term Income Investors?
Key Points
Vanguard Real Estate ETF provides exposure to a much broader portfolio of 145 holdings compared to the 30 positions found in State Street Real Estate Select Sector SPDR ETF.
While State Street Real Estate Select Sector SPDR ETF offers a lower expense ratio of 0.08%, Vanguard Real Estate ETF has delivered a slightly higher trailing-12-month dividend yield.
Both funds exhibit similar price volatility, though State Street Real Estate Select Sector SPDR ETF has shown slightly higher total returns over the last five years.
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Real estate investment trusts (REITs) provide a unique way to gain exposure to income-producing property without the headaches of direct property management.
The choice between State Street Real Estate Select Sector SPDR ETF (NYSEMKT:XLRE) and Vanguard Real Estate ETF (NYSEMKT:VNQ) primarily hinges on whether an investor prefers a concentrated, low-cost S&P 500-focused portfolio or broader market exposure with a higher yield.
Snapshot (cost & size)
| Metric | XLRE | VNQ |
|---|---|---|
| Issuer | SPDR | Vanguard |
| Expense ratio | 0.08% | 0.13% |
| 1-yr return (as of June 12, 2026) | 11.1% | 12.9% |
| Dividend yield | 3.10% | 3.50% |
| Beta | 1.01 | 1.02 |
| AUM | $7.3 billion | $69.8 billion |
Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.
Cost-conscious investors may lean toward the SPDR fund, which carries a lower 0.08% expense ratio. However, the Vanguard fund currently offers a yield gap of 0.4 percentage points, providing a higher payout for income seekers.
Performance & risk comparison
| Metric | XLRE | VNQ |
|---|---|---|
| Max drawdown (5 yr) | (34.10%) | (34.50%) |
| Growth of $1,000 over 5 years (total return) | $1,177 | $1,134 |
What's inside
Vanguard Real Estate ETF holds 145 positions, offering 97% exposure to real estate, 1% to basic materials, and 1% to communication services. Its largest positions include Welltower at 7.7%, Prologis at 7.2%, and Equinix at 5.6%. The fund launched in 2004 and has a trailing-12-month dividend of $3.49 per share. It is a straightforward equity fund that tracks a broad domestic real estate index with no complex quirks.
State Street Real Estate Select Sector SPDR ETF is more concentrated, with 31 holdings, focused on the S&P 500. Its portfolio is 98% real estate and 2% basic materials. Its largest positions include Welltower at 9.9%, Prologis at 9%, and Equinix at 7.4%. The fund launched in 2015 and has a trailing-12-month dividend of $1.40 per share. Like VNQ, it is a traditional equity ETF designed for liquid exposure to large-cap REITs.
For more guidance on ETF investing, check out the full guide at this link.
What it means for investors
These two funds offer different paths into the real estate sector, with XLRE tracking the largest domestic players and VNQ casting a wider net across the entire investable market. The funds share the same top holdings, which has driven their similar returns over the last few years.
With only around 30 holdings, XLRE presents greater concentration risk, although it’s important to remember it doesn’t just hold 30 properties, it holds essentially 30 different real estate portfolios. That makes VNQ’s 145 positions that much more impressive. Despite its slightly higher expense ratio, VNQ offers the better entry for real estate investors seeking passive exposure. Its large assets under management means it’s highly liquid, its portfolio lends instant diversification, and it pays out a higher dividend. Income investors looking to reinvest that dividend will enjoy even greater gains. Over the last year, as of June 12, VNQ’s price has gained 8.6%. But on a total return basis, which includes reinvested dividends, that figure jumps to nearly 13%.
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Sarah Sidlow has positions in Vanguard Real Estate ETF. The Motley Fool has positions in and recommends Equinix, Prologis, and Vanguard Real Estate ETF. The Motley Fool has a disclosure policy.
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