A Tour of ETFs: iShares CDN REIT Sector Index Fund
A Real Estate Investment Trust or REIT is an asset class that allows you to get exposure to real estate in your portfolio. Real estate is an interesting asset class because historically it has offered a higher return than bonds (but less than equities) albeit at a higher risk (again less risk than equities). Also, real estate has low correlation with other asset classes and adding it to your portfolio will reduce overall volatility. An allocation of 5%-10% to REITs seems reasonable but some recommend going as high as 20%.
The iShares CDN REIT Index Fund (TSX: XRE) is composed of REITs that are listed on the TSX. The MER on the fund at 0.55% is on the high side and might be acceptable for smaller investments. However, if you have a large portfolio you may want to invest in the underlying REITs directly because the two largest REITs – RioCan (REI.UN) and H&R (HR.UN) – make up 36% of the fund.
PS: I noticed that Million Dollar Journey has published a primer on REITs, which you may want to check out as well.