ETF's vs REIT's What's the Difference

ETF Investments

1. Core Definitions

Feature	ETFs	REITs
What they are	Funds holding baskets of assets (stocks, bonds, commodities, sectors, etc.)	Companies that own or finance income‑producing real estate
How they trade	Like stocks on an exchange	Like stocks on an exchange
Income focus	Varies by ETF type	High income focus; must distribute 90% of taxable income

Sources: ETFs explained as diversified funds holding multiple assets ; REITs required to distribute 90% of taxable income The Motley Fool.

2. Diversification

ETFs

• Can diversify across entire markets, sectors, countries, or asset classes.

• Example: broad‑market ETFs, bond ETFs, commodity ETFs, sector ETFs.

REITs

• Diversified within real estate only.

• You can buy individual REITs (riskier) or REIT ETFs for broader exposure.

3. Income Potential

ETFs

• Income varies widely.

• Dividend ETFs or bond ETFs can provide steady income, but not as high as REITs typically.

REITs

• Known for high dividend yields because of the 90% payout rule.

• Attractive for income‑focused investors.

4. Risk Profile

Risk Type	ETFs	REITs
Market risk	Depends on ETF type; broad ETFs tend to be lower risk	Sensitive to real estate cycles, interest rates, and sector concentration
Volatility	Broad ETFs = lower; sector ETFs = higher	Often more volatile due to rate sensitivity
Concentration	Low (if broad)	High (real estate only)

5. Liquidity & Ease of Use

Both ETFs and REITs trade intraday like stocks, offering high liquidity.

However:

• ETFs offer more flexibility because you can choose from thousands of strategies.

• REITs are simpler if your goal is specifically real estate income.

6. Costs

ETFs

• Typically low expense ratios.

• REIT ETFs vary but are still generally affordable. Example: VNQ, IYR, SCHH, XLRE, ICF all have competitive expense ratios.

REIT Investing

REITs

• No fund expense ratio (if buying individual REITs), but you take on single‑company risk.

7. When Each Makes Sense

Choose ETFs if you want:

• Broad diversification

• Lower volatility

• Long‑term growth

• Exposure to multiple sectors or asset classes

Choose REITs if you want:

• High, steady income

• Real estate exposure without owning property

• A hedge against inflation (historically)

8. What About REIT ETFs?

These combine the best of both:

• Diversified real estate exposure

• High income

• Lower risk than picking individual REITs

Top examples include VNQ, IYR, SCHH, XLRE, ICF.

Bottom Line

• ETFs = broad, flexible, diversified investing.

• REITs = high‑income, real‑estate‑focused investing.

• REIT ETFs = a hybrid that gives you real estate exposure with diversification.

Given your interest in long‑term, stable strategies, Stephen, ETFs (including REIT ETFs) often fit beautifully into a disciplined, diversified portfolio—while individual REITs can add income but come with more concentrated risk.

If you want, I can help you compare:

• Dividend ETFs vs. REIT ETFs

• Individual REITs vs. REIT ETFs

• Or build a sample allocation based on your goals