Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect the real estate market to thrive when the economy eventually and inevitably recovers, the iShares Cohen & Steers Realty Majors ETF (NYS: ICF) could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously.
ETFs often sport lower expense ratios than their mutual fund cousins. The iShares ETF's expense ratio -- its annual fee -- is a relatively low 0.35%.
This ETF has performed reasonably well, beating the S&P 500 over the past 10 years but lagging it over the past five. As with most investments, of course, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.
With a low turnover rate of 9%, this fund isn't frantically and frequently rejiggering its holdings, as many funds do.
What's in it?
Several of this ETF's components made strong contributions to its performance this year. Health Care REIT (NYS: HCN) , up 8% in 2011, is attracting investors with its focus on properties such as residential care facilities and doctors' offices, which should see much demand as our population ages. (Health Care REIT has been named one of the 10 highest-rated REITs, along with the likes of RAIT Financial Trust (NYS: RAS) and others.) HCP (NYS: HCP) , another health-care REIT, gained 8%. It's a dividend powerhouse, among other things, paying more than a 5% yield and regularly raising its payout.
Other companies didn't add to the ETF's returns this year but could have an effect in the years to come. General Growth Properties (NYS: GGP) , down 11%, is a company that has emerged from bankruptcy protection with restructured debt and, like gypsum giant USG (NYS: USG) , may be among the small subset of bankruptcy-declarers that makes investors wealthier.
The big picture
Demand for real estate isn't going away anytime soon. A well-chosen ETF can grant you instant diversification across any industry or group of companies -- and make investing in and profiting from it that much easier.
At the time thisarticle was published