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I recently began investing and planning for retirement. I opened up a Roth IRA through Vanguard and bought about $2,000 of Vanguard Target Retirement 2045 Fund (VTIVX). I'd like to invest in real estate through REITs.

I saw both of these REITs through my reading: Vanguard REIT Index Inv (VGSIX) and Vanguard REIT ETF (VNQ). I keep hearing ETFs are the way to go due to their low expense ratio. Beyond that, I don't know the difference between the two. Can someone explain what those differences are and the advantage of each? I plan to have about 20% of the REIT in my Roth (at least for this tax year).

Dheer
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Gabe
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2 Answers2

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I'd start by reading the answer to What is the difference between shares and ETF?

A look at the Yahoo pages for Vanguard REIT Index Inv (VGSIX) and Vanguard REIT Index ETF (VNQ) show different annual expenses, 0.10% for the ETF, 0.24% for the fund. But, the ETF will have the trading cost of a stock purchase, say $10, which for small purchases will add up. (Think "it's a 1% cost to buy $1000, but then I save $1.40/yr on fees.) For a $2000 purchase, the $10 commission is 0.5%, so it partially depends on the scale of your investing.

Community
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JoeTaxpayer
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The same question was asked on https://www.bogleheads.org/forum/viewtopic.php?t=146578 (mirror), and has some pointers that complement JoeTaxpayer's answer:

Franck Dernoncourt
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