VNQI vs. XLRE: Which Real Estate ETF Is Better for Beginner Investors?
Key Points
State Street Real Estate Select Sector SPDR ETF offers a lower expense ratio and larger assets under management than Vanguard Global ex-U.S. Real Estate ETF.
Vanguard Global ex-U.S. Real Estate ETF provides a higher trailing-12-month dividend yield but has seen a lower total return over the last five years.
State Street Real Estate Select Sector SPDR ETF concentrates on 31 U.S. companies, while Vanguard Global ex-U.S. Real Estate ETF diversifies across more than 700 international holdings.
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Real estate investors often weigh the stability of the domestic market against the growth potential of international properties. The State Street Real Estate Select Sector SPDR ETF (NYSEMKT:XLRE) provides concentrated exposure to the largest real estate companies in the S&P 500, while the Vanguard Global ex-U.S. Real Estate ETF (NASDAQ:VNQI) offers broad international diversification across 30 countries.
Let’s see how the two stack up for interested investors.
Snapshot (cost & size)
| Metric | VNQI | XLRE |
|---|---|---|
| Issuer | Vanguard | SPDR |
| Expense ratio | 0.12% | 0.08% |
| 1-yr return (as of 6/18/26) | 4.5% | 8.5% |
| Dividend yield | 4.8% | 3.2% |
| Beta | 0.92 | 1.01 |
| AUM | $3.8 billion | $8.1 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.
The State Street fund is more affordable for long-term holders with an expense ratio of 0.08%, whereas the Vanguard fund charges 0.12%. Investors seeking immediate income may prefer the Vanguard fund, which currently offers a higher trailing-12-month distribution yield.
Performance & risk comparison
| Metric | VNQI | XLRE |
|---|---|---|
| Max drawdown (5 yr) | (35.8%) | (34.1%) |
| Growth of $1,000 over 5 years (total return) | $939 | $1,167 |
What's inside
The State Street Real Estate Select Sector SPDR ETF is a focused fund that tracks the Real Estate Select Sector Index with just 31 holdings. Its largest positions include Welltower at 10.4%, Prologis at 9.16%, and Equinix at 7.45%. This fund, which was launched in 2015, provides targeted exposure to domestic real estate management and equity trusts. It allocates 98% of its portfolio to the real estate sector and 2% to basic materials, and it has a trailing-12-month dividend of $1.40 per share.
In contrast, the Vanguard Global ex-U.S. Real Estate ETF offers a much broader scope by tracking the S&P Global ex-U.S. Property Index with more than 700 positions. Its top positions include Goodman Group at 4.3%, Mitsubishi Estate at 2.8%, and Mitsui Fudosan at 2.4%. Launched in 2010, the Vanguard fund captures non-U.S. real estate businesses across more than 30 countries. The portfolio is comprised of 93% real estate, 5% cash and other assets, and 1% industrials, and it has paid $2.16 per share over the trailing 12 months.
For more guidance on ETF investing, check out the full guide at this link.
What this means for investors
Adding a real estate ETF to your portfolio can be a good way to add diversity, stability, and income generation. And while high interest rates and an uncertain macroeconomic environment have pressured the real estate sector recently, they may be flashing a buy signal before the sector eventually rebounds. Choosing between XLRE and VNQI comes down to what you want more out of your real estate investment.
XLRE is larger, more stable, and has generated higher recent returns for investors, but it comes up short in the dividend comparison. It has more assets under management, but a more concentrated portfolio with only 30 holdings. But the real point of XLRE is to track the performance of the U.S. real estate market.
On the other hand, VNQI, with more than 700 positions, offers access to the rest of the investable real estate world, in emerging and developed markets outside of the U.S. Its higher dividend yield somewhat makes up for the greater risk you take on by owning these companies. For most investors, a broad U.S.-based real estate index like XLRE is a good way to add real estate exposure without additional maintenance. If you’re looking for even more diversification, or if you have high conviction in international markets, it could make sense to add a small allocation to VNQI in addition to a holding in XLRE.
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Sarah Sidlow has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Equinix, Goodman Group, and Prologis. The Motley Fool has a disclosure policy.
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