Real estate ETFs

Investing / Portfolios
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TL;DR: Are you investing in real estate ETFs? Is that because you don’t own a house? What have you chosen? Why? Do you have a home-bias or only a world ETF? If you have a world one, are you OK with a large US weight?

If you don’t own a house I consider having some real estate exposure as a good way of diversification from stocks and bonds. I’m planning to do 5-10% in this area. (if you own a house you have a huge overweight of the “real estate sector” in a sense already, then I would do 0% personally)

I’m unsure whether a home bias is good to be honest, but so far am considering 25% swiss ones, something like DUPF, SRECHA, SRFCHA or some mutual funds otherwise. Or even some crowd/co- owned property. Not sure yet.

For the world part there are a few options: the usual expensive IE-one: GBRE or the cheaper US-ones: REET, RWO - but all of them have a rather strong weight on USA, something like 55-60%.

I’d prefer a smaller weight on USA, which could be achieved with 1 US-focused one such as USRT, IYR, VNQ and 1 ex-US one such as VNQI or perhaps CBHOUS which is europe only. It does start to look a bit messy though, but might be an option.

Anyone would like to share what they do, think?

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I dont consider RE investing in general as a diversification strategy from stocks. And especially I would not consider RE ETFs diversified from the general stock market. I think they are very highly correlated so no point in investing in those to be honest

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Do those return look that good compared to the global stock market?

SRFCHA:SW 5 Years return 6.73%
SRECHA:SW 5 Years return 5.72%
DUPF:SW 3 Year Return -2.34%

Compared to the SMI 5 years return (CSSMI SW) 4.93 %
Or Vanguard Total World Stock which could be seen as way more diversified, 5 years returned 6.49%

Is it really worth the risk to be exposed to swiss real estate? Is it expected to do better than other regions, other class of assets or to be more stable?

Buying a home could potentially be more interesting because you can use you second and third pillar to finance. You can even do it by pledging them to the bank and continue having the principal invested. But the risk of owning one property is rather scary…

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For me owning the home where you live is usually not the same as investing in real estate ETF. The reason is that your home is probably in a small suburb or village, does not have an elevator and is not targeted to be rented. On the other side real estate ETF have strict criterion (near of public transport, ease of access, big cities, house with elevator…). Do not expect to make a good profit with your home as you could with real estate ETF.
On the other hand I am not sure that real estate funds is a good opportunity after so many years of negative interest rate. The ratio price of ETF versus price of underlying asset is high, typically 130%. It is even possible that the price of the underlying asset is overestimated due to speculation.
Then the ongoing fees (management fees) are high in the range of 1%. I did some research and also discovered that there is always some leverage involved and the cost of the money borrowed is surprising high. My conclusion is that it is maybe a good diversification, it remains more risky than bonds in today’s market and do not expect astronomical returns. Last and not least, the price of it may well be highly correlated with stock price.

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I understand they’re even also included in indexes, so even influence the indexes too. Nevertheless many of the lazy portfolios contain eg 10% REITs.

True, don’t know why that one went down.

The advantage of the home bias allocation would be zero currency risk - not necessarily better relative returns.

Maybe not ‘good profit’ - but thanks to a potentially high margin it could be higher than otherwise expected. But I agree, it’s not the same as “professional real estate”.

Good point. Everything is expensive it seems.

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Does anyone have a clue what happened to SRECHA.SW ? It looks like it has lost 85% of it’s value today :face_with_monocle:

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Found out that it is a stock split 1:7 if anyone else got scared too today! Somehow they should warn people in advance…

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It looks that it was annonced on the 26th july

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Aha, where did you find this information?

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It was published on swiss fund data

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Thanks for the hint. For anyone else looking for the direct link to the official publication it is here:

Strange that my broker (DEGIRO) did not inform me at all.

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I own a house in CH and a rental property in EU which combined make around 25% of my NW. I also keep 5% of my NW invested in REITs, 3.5% in Europe (IPRP) and 1.5% in the US (REET).

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