ETF – Exchange Traded Fund
An exchange traded fund, or ETF, is an investment company organized under the same laws as mutual funds. Investors own shares of the fund which is a pool of assets and securities. ETFs are designed to track a specific index such as the S&P 500 or a commodity like the price of gold.
Function
Shares of ETFs trade on the stock exchanges. You cannot purchases shares directly from the ETF company. ETFs allow investors to profit from the price changes of many different market sectors and asset classes with liquidity and low commissions.
REIT – Real Estate Investment trust .
REIT stands for real estate investment trust. A REIT is a company that either owns commercial real estate or provides real estate mortgages. REITs are formed under a special section tax law and must earn at least 75 percent of their income from real estate or mortgage operations and pay out at least 90 percent of taxable income to shareholders as dividends.
Function
REIT shares usually pay high dividends and are popular with investors looking for high current income and exposure to commercial real estate. Different REITs will own apartments, shopping centers, medical buildings and other commercial property in different geographical locations.
Size
The first ETF, the SPDR S&P500 was formed in 1993. The number of ETFs has grown rapidly with over 800 funds available to investors by 2009. The number of REIT stocks has been stable for many year, and 137 were listed on the stock exchanges in 2009.
Fun Fact
here are ETFs that track a wide range of stock and investment categories. There are over 20 ETFs that have REITs as their primary holdings. The largest REIT-focused ETFs are the iShares Dow Jones Real Estate Fund, symbol IYR, and the Vanguard REIT Index, symbol VNQ.