Portfolio diversification through ETFs
Asset allocation is a primary factor responsible for investment returns. ETFs are a convenient way for investors to build a portfolio that meets specific asset allocation needs. ETFs are also a convenient and easy way to achieve portfolio diversification across a number of asset classes.
Most ETFs track a market index, mirroring the performance of an entire market in a single trade. In this article, we’ll look at how sector-specific and sector-agnostic ETFs invest in Camden Property Trust (CPT) stock.
Camden Property Trust is a major stock on the NYSE (New York Stock Exchange), with a market capitalization of $6.6 billion. It’s part of an S&P 400 index. Consequently, Camden Property Trust sees allocation in most of the REIT-specific ETFs.
For example, the iShares Cohen & Steers REIT ETF (ICF) has 1.6% exposure in Camden, while the iShares US Real Estate ETF (IYR) has 0.79% stake in the company. The other major REIT ETF, the SPDR Dow Jones REIT ETF (RWR), has 1.1% exposure in Camden. Another top Real Estate ETF, the SPDR Dow Jones Global Real Estate ETF (RWO), has 0.66% exposure in the company.
REIT ETFs invest in other REIT stocks such as AvalonBay Communities (AVB), Essex Property Trust (ESS), and Equity Residential (EQR). The iShares US Real Estate ETF (IYR) is the biggest with $4.5 billion in assets under management and an expense ratio of 0.43%. The iShares Cohen & Steers REIT ETF (ICF) has $3.5 billion in assets under management with an expense ratio of 0.35%.
The SPDR Dow Jones REIT ETF (RWR) has $3 billion in assets under management with an expense ratio of 0.25%. The SPDR Dow Jones Global Real Estate ETF (RWO) has $1.9 billion in assets under management with an expense ratio of 0.5%.
The holdings of a particular company in an ETF depend on the investment objective of the ETF. Consequently, sector-specific ETFs should have a higher exposure to companies in the sector than sector-agnostic ones. We outline the holdings of various ETFs in the above chart.
Sector-agnostic ETFs such as the iShares S&P Mid-Cap 400 Growth ETF (IJK) and the Guggenheim S&P MidCap 400 Pure Growth ETF (RFG) also have an exposure to Camden of 0.78% and 1.3%, respectively. IJK has an asset base of $5.4 billion and an expense ratio of 0.25%.
Please visit Market Realist’s Real Estate Investment Trusts page to learn more about this industry.