Which International Real Estate ETF Is the Better Buy?

SPDR Dow Jones International Real Estate ETF (NYSEMKT:RWX) charges a higher expense ratio and holds fewer stocks compared to Xtrackers International Real Estate ETF (NYSEMKT:HAUZ), which has a lower fee and a higher yield.

Both RWX and HAUZ target international real estate exposure, but their approaches and profiles differ. This comparison examines cost, yield, returns, risk, liquidity, and portfolio construction to help investors determine which option best aligns with their objectives.

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year weekly returns. The one-year return represents total return over the trailing 12 months.

RWX has an expense ratio of 0.59%, which is six times higher than HAUZ’s expense ratio of 0.10%, and pays a lower dividend yield.

RWX tracks the Dow Jones Global ex-U.S. Select Real Estate Securities Index, focusing on international real estate. The fund is nearly two decades old and has 120 holdings, with top positions in Mitsui Fudosan Co., Scentre Group, and Swiss Prime Site.

HAUZ, by contrast, offers much broader exposure with 408 holdings, according to its underlying index. Its largest positions include Goodman Group, Mitsui Fudosan, and Mitsubishi Estate Company. For investors seeking broader diversification across international property companies, HAUZ may be an appealing option.

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Since 2013, HAUZ has grown its total returns by 3.3% annually, compared to RWX’s 1.4% over the same period. A good portion of this outperformance comes from the fact that HAUZ’s expense ratio is roughly one-sixth of RWX’s 0.59% figure, along with its dividend yield being half a percentage point higher. HAUZ delivered these outsize returns with a smaller five-year drawdown, broader diversification, and larger asset base as well.

Considering that five of the ETF’s top ten holdings are the same, it appears that HAUZ is a clear winner, thanks to its better cost efficiency, stronger income generation, better historical returns, and broader diversification. However, investors should note that HAUZ and RWX each dedicate 24% and 30% of their holdings to Japanese REITs, respectively, so it is essential to be aware of this focus. Similarly, HAUZ’s second-largest country allocation is Australia at 13% and RWX’s is the U.K. at 14% — so investors will want to be comfortable having exposure to these countries before they invest.

Ultimately, I could only look to buy HAUZ for my portfolio, despite its slight underperformance this year, thanks to it:

• holding three times as many positions

• having a much lower expense ratio

• paying a higher dividend yield

• boasting better geographic diversification

• holding a superior long-term track record

HAUZ appears to be the better buy, in my Foolish opinion.

ETF: Exchange-traded fund that holds a basket of assets and trades on an exchange like a stock.
Expense ratio: Annual fund operating costs expressed as a percentage of the fund’s average assets.
Dividend yield: Annual dividends paid by a fund divided by its current share price, shown as a percentage.
Total return: Investment performance including price changes plus all dividends and distributions, assuming reinvestment.
Beta: Measure of a fund’s volatility relative to a benchmark index, typically the S&P 500.
AUM: Assets under management; the total market value of all assets held by a fund.
Max drawdown: The largest peak-to-trough decline in a fund’s value over a specified period.
Growth of $1,000: Illustration showing how a $1,000 investment would have changed in value over time.
Index: A rules-based basket of securities used to track or benchmark a specific market segment.
Sector allocation: How a fund’s assets are distributed across different industries or sectors, such as real estate or cash.
Holdings: The individual securities, such as stocks or bonds, that a fund owns.
Real estate securities: Stocks or similar instruments issued by companies that own, operate, or finance real estate assets.

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Josh Kohn-Lindquist has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goodman Group. The Motley Fool has a disclosure policy.

RWX vs. HAUZ: Which International Real Estate ETF Is the Better Buy? was originally published by The Motley Fool