RWR vs. GQRE: Which REIT ETF Is the Better Buy for Investors?

Investors often turn to real estate investment trusts (REITs) for income and a hedge against inflation. The State Street SPDR Dow Jones REIT ETF (NYSEMKT:RWR) offers lower costs and a domestic focus, while the FlexShares Global Quality Real Estate Index Fund (NYSEMKT:GQRE) provides a higher yield and global diversification.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-year return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

Cost is a clear differentiator here -- RWR is the significantly cheaper fund with a 0.25% expense ratio. GQRE charges higher fees, but it also offers a notably higher dividend yield of 4.29% compared to RWR’s 3.35%.

Performance & risk comparison

What's inside

Launched in 2001, RWR tracks the Dow Jones U.S. Select REIT Capped Index, holding 97 positions. Its largest holdings include Welltower (NYSE:WELL) at 10.5%, Prologis (NYSE:PLD) at 9.1%, and Simon Property Group (NYSE:SPG) at 4.6%.

GQRE tracks the Northern Trust Global Quality Real Estate Index, holding 200 global stocks. Its top holdings include Equinix (NASDAQ:EQIX) at 6.9%, Welltower at 4.5%, and Prologis at 4.4%. GQRE was launched in 2013.

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What this means for investors

The choice between RWR and GQRE ultimately comes down to what an investor wants from their real estate allocation.

RWR's lower expense ratio and stronger recent returns make it an efficient way to own a slice of the U.S. commercial real estate market -- and its historically smaller drawdowns suggest it's held up a bit better during rocky stretches. That might be fairly important for investors who lean on REITs for portfolio stability as much as income.

GQRE, on the other hand, trades some of that cost efficiency for diversification and yield. By spreading its roughly 200 holdings across global real estate markets rather than concentrating solely on U.S. names, it reduces reliance on any single country's interest-rate or property cycle -- a notable consideration given how sensitive REITs are to rate moves. Its higher 4.2% yield may also appeal more directly to investors building an income-focused portfolio, even if that comes with higher fees.

Domestic REIT funds have generally outpaced globally diversified funds since 2020, largely due to a stronger U.S. property recovery and dollar strength, which has weighed on overseas returns. That's part of why RWR boasts better one-year numbers. That doesn't necessarily mean RWR is the better fund going forward -- globally diversified funds like GQRE are more likely to outperform domestic funds when U.S. real estate stumbles or when the dollar weakens.

Also worth understanding: Despite their different geographic mandates, these two funds aren't as distinct as they might seem at first glance. Five of the names in RWR's top 10 holdings also appear among GQRE's top 10, including Welltower and Prologis, which rank among the largest positions in both funds.

For investors who want low-cost, concentrated exposure to blue chip U.S. landlords, RWR is the more straightforward pick. For those prioritizing income and international diversification -- and willing to pay a bit more for it -- GQRE offers a reasonable alternative worth considering.

Andy Gould has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Equinix, Prologis, and Simon Property Group. The Motley Fool has a disclosure policy.