SCHH Offers Low-Cost U.S. REITs While REET Adds Global Reach

The primary trade-off between iShares Global REIT ETF (REET -0.35%) and Schwab U.S. REIT ETF (SCHH -0.40%) centers on geographic scope versus cost, as REET offers global reach while SCHH provides cheaper domestic focus.

Investors looking to build a real estate foundation in their portfolios must decide between the relative simplicity of domestic markets and the broad diversification of global property. While both funds provide liquid access to real estate investment trusts, they differ significantly in their geographic reach, total holdings, and expense structures.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

The Schwab U.S. REIT ETF is the more affordable entry point with an expense ratio of 0.07%, exactly half the fee charged by its iShares counterpart. For income-focused investors, however, the iShares Global REIT ETF presents a more compelling payout, maintaining a 0.60 percentage point yield advantage over the domestic fund.

Performance & risk comparison

What’s inside

The Schwab U.S. REIT ETF (SCHH -0.40%) focuses exclusively on domestic equity REITs, aiming to mirror the performance of the U.S. real estate market while excluding mortgage-backed securities. Its portfolio of roughly 120 holdings is heavily concentrated in Real Estate at 99.00%, with a trace amount of Basic Materials at 1.00%. Its largest positions include Welltower Inc (WELL -1.48%) at 10.84%, Prologis Reit Inc (PLD -0.25%) at 8.64%, and Simon Property Group Reit Inc (SPG +0.82%) at 4.69%. The Schwab fund was launched in 2011.

The iShares Global REIT ETF (REET -0.35%) offers a much wider net, tracking an index composed of real estate equities in both developed and emerging markets. This global approach results in a larger basket of 318 holdings and a sector allocation of 100.00% Real Estate. Its largest positions include Welltower Inc (WELL -1.48%) at 9.02%, Prologis Reit Inc (PLD -0.25%) at 7.18%, and Equinix Reit Inc (EQIX -3.45%) at 5.45%. The iShares fund was launched in 2014.

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What this means for investors

The difference between SCHH and REET isn’t really about deciding whether to invest in U.S. real estate or global real estate, but rather about determining how much additional non-U.S. REIT exposure to include alongside a core holding of U.S. real estate. The Schwab U.S. REIT ETF provides investors with low-cost access to domestic equity REITs, whereas the iShares Global REIT ETF includes overseas REITs without completely abandoning the U.S. market.

SCHH is the more straightforward U.S. REIT fund. Its returns are tied to publicly traded domestic REITs across property types such as health care, industrial, retail, and data centers. REET owns more securities and reaches into overseas property markets, but many of its largest holdings can still overlap with SCHH. That makes REET broader, not necessarily a completely different real estate portfolio.

The SCHH fund could be appropriate for investors seeking a straightforward and inexpensive position in U.S. REITs, while the REET fund might be more suitable for people who want a single ETF that provides exposure to both U.S. and non-U.S. REITs, even though it involves higher fees as well as fluctuations in currency and the various regional property market risks associated with investing globally. As with both funds, since they are listed real estate equity ETFs, returns can still be influenced by interest rates, financing costs, property cycles, and market sentiment.