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One of the easiest ways to take advantage of owning real estate is through purchasing REITs (real estate investment trusts). The two most famous REITs out there are VNQ (Vanguard Real Estate ETF) and SCHH (Schwab U.S. REIT ETF). In this article, I want to look at both of these REITs and give my opinion on which one of these is actually the better investment to make.
The first thing I want to look at is how expensive it is to own these. VNQ has an expense ratio of .12% while SCHH has an expense ratio of .07%. This means that SCHH is a less expensive investment to make. While this is a point in favor of SCHH, the expense ratio does not really matter if you're making less money. SCHH offers a dividend yield of 2.13% while VNQ offers a dividend yield of 3.07%. This means that one would receive a higher dividend by investing in VNQ.
Another thing I want to look at is past performance. Obviously, past performance does not necessarily predict future performance, but I do believe that it is important to look at. Over the last 5 years, VNQ has increased in value by 1.15%. That's not a huge return, but most people who own this ETF are not owning it for massive returns but are more holding it for the dividend. SCHH, on the other hand, fell by 4.85% over the last 5 years. VNQ also performed better over the last 10 years. Again, past performance does not always indicate future performance, but it is definitely worth considering.
In conclusion, I think that VNQ is the better REIT. It's more expensive to invest in, but it offers a higher dividend and has increased in value faster. VNQ seems to be a good investment choice for those who just want to invest in something stable and collect passive income through dividends.
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