CanETF Portfolio Trade #2: Dipping Into U.S. REITs

REITs have sold off significantly in the U.S. this year, and the chance to get the Fidelity® MSCI Real Estate Index ETF (FREL) at $22.00 (a new 52-week low)was a compelling opportunity. The following 1 year chart shows a substantial fall from the highs of over $25 reached not long ago, and an unmistakable breakdown of the uptrend.

Trade 2 Chart FREL

For FREL, the yield of the last year’s distributions is 3.67% at $22.00. A small position of 20 shares leaves room for adding if a yield closer to 4% arises.

Trade 2 Order FREL
Trade 2 Filled FREL

Trade 2 Confirmation FREL

In terms of what U.S. REIT was chosen, the rationale laid out in the article titled: Why I Sold XLRE And Bought FREL (Not VNQ) stands.  In fact, during the period from November 1, 2016 (the day after the article was published) to January 31, 2018 (the last day VNQ tracked the MSCI US REIT Index), FREL outperformed VNQ significantly, returning 6.63% annualized compared to the 2.76% of VNQ.

However, as mentioned VNQ has changed to the MSCI US Investable Market Real Estate 25/50 Transition Index starting February 1, 2018 (source: Vanguard VNQ page). This means FREL and VNQ should be essentially the same from here, as the MSCI USA IMI Real Estate Index followed by FREL and the MSCI US Investable Market Real Estate 25/50 Index are nearly identical.

Current Allocation and Balance – February 8, 2018

TFSA

Cash: $5,000.00 CAD

RRSP

Cash: $3,807.80 USD

iShares U.S. Preferred Share ETF (PFF) – 20 Shares: $735.80

Fidelity® MSCI Real Estate Index ETF (FREL) – 20 Shares: $438.20

RRSP Total

$4,981.80 USD

Grand Total (CAD at 1.2566 per USD as of 2/7/2018)

$11,260.13 CAD

The total CanETF Portfolio value has increased since the January 2018 update even though both PFF and FREL have declined modestly. This is because CAD has gained relative to USD in the past week or so.

The CanETF Portfolio is not meant to be taken as investment advice. Please conduct due diligence on any ETF investment you are considering, including but not limited to a review of the prospectus, underlying benchmark methodology (if applicable), portfolio characteristics, holdings, performance since inception, role in your existing portfolio, and outlook for future performance.

One Reply to “CanETF Portfolio Trade #2: Dipping Into U.S. REITs”

Leave a Reply

Your email address will not be published. Required fields are marked *