Best REIT ETFs and Mutual Funds for Passive Investors

For most passive investors, the best REIT fund is a broad index fund with a low expense ratio (the yearly fee a fund takes out of its assets) that your brokerage account, IRA, or 401(k) can buy. As of October 2026, Schwab U.S. REIT ETF (SCHH) and Fidelity Real Estate Index Fund (FSRNX) charge 0.07% a year, iShares Core U.S. REIT ETF (USRT) and State Street Real Estate Select Sector SPDR ETF (XLRE) charge 0.08%, and Vanguard Real Estate ETF (VNQ) and the same fund's Admiral Shares (VGSLX), sold as a mutual fund, charge 0.13%. Past the fee, the funds differ in the index they track, how many companies they hold, and the minimum purchase. A total stock market fund already keeps about 2% of its money in real estate stocks, so any REIT fund you add raises your real estate share above the market's own weight.

How do the main REIT index funds compare?

A REIT (real estate investment trust) is a company that owns or finances income-producing property; what REITs are and how they work covers the basics. Expense ratios below come from each fund's current prospectus or fund page, and each holdings count carries its own date.

VNQ and VGSLX are two share classes of the same Vanguard fund, so they own the same stocks. An ETF (exchange-traded fund) trades on a stock exchange during the day, so the minimum is the price of one share, or less at a broker that sells fractional shares. A mutual fund trades once a day at its closing price and may set an opening minimum. On $10,000, a 0.07% fund costs about $7 a year and a 0.13% fund about $13. Your broker can also charge commissions or other fees that the expense ratio does not include, so check its fee schedule before you buy.

The index decides what you own:

• Cell tower and timber REITs. USRT's sector breakdown on October 22, 2026 listed no cell tower or timber REITs. VNQ had 8.2% of its stocks in cell tower REITs on September 30, 2026.
• Companies that are not REITs. VNQ, VGSLX, FSRNX, and XLRE track the stock market's real estate sector, which also includes real estate service, management, and development companies. Those companies were 6.6% of FSRNX on July 31, 2026, led by CBRE at 2.8%, and real estate services firms were 5.5% of VNQ on September 30, 2026. SCHH and USRT track indexes made up only of equity REITs, the kind that own property.
• Company size. XLRE holds only the real estate companies in the S&P 500, so it leaves out midsize and small REITs.
• Mortgage REITs. None of these funds holds mortgage REITs, which lend money instead of owning buildings.

Can you hold a REIT fund in your 401(k)?

Only if your plan offers one, either on its menu (the list of funds the plan picks) or through a brokerage window (a plan feature that lets you buy investments that are not on the menu). Federal rules require your plan to give you a chart comparing each menu option's expense ratio, returns, and benchmark index before you first invest and at least annually after that, and to describe any brokerage window and its fees.

1. Find that chart and look for a fund with "real estate" or "REIT" in its name. A plan can offer a different share class of a fund in the table, such as Vanguard Real Estate Index Fund instead of VNQ, so match the index and compare the expense ratio your plan lists.
2. If the menu has no REIT fund, check whether the plan offers a brokerage window. It may let you buy an ETF such as SCHH or VNQ, and the plan's fee disclosure lists what the window costs.
3. If your plan has neither, you can hold any fund in the table in an IRA instead.

How much of your portfolio should go into REIT funds?

No rule sets the number, so start with what you already own. On September 30, 2026, real estate stocks were 2.1% of Vanguard Morningstar Total Stock Market ETF (VTI), and a total market or S&P 500 index fund holds the largest REITs in proportion to their market value.

A separate REIT fund adds to that weight. Suppose 90% of your stock money is in a total market fund and 10% is in a REIT fund:

• Real estate share: 0.90 x 2.1% + 10% = 11.9% of your stocks, more than five times the market weight.
• With a 5% REIT fund instead: 0.95 x 2.1% + 5% = about 7.0%.

Three facts should move your number:

• Swings. The FTSE Nareit All Equity REITs index returned 41.30% in 2021 and lost 24.95% in 2022. A bigger REIT slice makes those swings a bigger part of your results.
• Account type. Nareit reports that 79% of the dividends REITs paid for 2025 were ordinary income. In a taxable account, that income is taxed each year at your regular rate, less a deduction for part of it; an IRA or 401(k) does not tax dividends as they are paid. REIT tax treatment compares the account types.
• Property you already own. A rental property is already real estate exposure, concentrated in one building and one local market. A REIT fund adds more of the same asset class, spread across property types and many companies.

To keep the share where you set it, check once a year. If the REIT fund has drifted from your target by more than a set amount, such as 2 percentage points, sell or buy to get back. Selling inside an IRA or 401(k) does not create a taxable gain; in a taxable account, you can send new contributions or dividends to whichever fund is under target instead of selling. To add REITs based outside the United States, see international REITs.

Do you need to pick REIT sectors yourself?

No. A broad REIT index fund already spreads your money across property types in proportion to their market value. On September 30, 2026, VNQ held 18.6% of its stocks in health care REITs, 14.1% in retail, 11.6% in industrial, 11.0% in data centers, 8.2% in cell towers, 6.6% in apartments, and 5.7% in self-storage. Types of REITs explained describes what each property type owns.

Sector results differ widely from year to year, which is the risk in building your own mix. In Nareit's data for 2025, health care REITs returned 28.45% and industrial REITs 17.05%, while self-storage REITs lost 9.98% and apartment REITs lost 8.56%. The All Equity REITs index returned 2.27% that year, so a portfolio built from two or three sectors could have landed far above or below it.

If you still want a tilt toward one sector or a few individual REITs, keep the broad fund as the core and make the tilt small. With 10% of your stocks in REITs, putting 2 of those percentage points into one sector means a 30% drop in that sector costs you an extra 0.6% of your stocks (2% x 30%), on top of the loss on that sector's share of your broad fund. Individual REITs also require you to check each company's debt and dividend coverage; how to invest in REITs walks through buying them.