If you want to track a specific index — like the housing sector — you may want to consider purchasing an ETF or “exchange-traded fund,” which is an investment product that’s a bundle of bonds, stocks or other assets, similar to a mutual fund. ETFs are publicly traded and are easy to purchase.
“An investor could own a couple of ETFs, yet they could ‘own’ hundreds of stocks inside just a couple of names,” said David Auerbach, managing director of Armada ETF Advisors.
Armada ETF is behind the Home Appreciation US REIT ETF.
“Imagine owning a share of an S&P 500 ETF,” he said. “One ETF share equals exposure to 500 different stocks.”
|A HOUSE||TIDAL ETF TRUST HOME APPRECIATION US REIT||18.65||+0.39||+2.12%|
According to Auerbach, an advantage of ETFs — compared to mutual funds — is that they are publicly traded during market hours.
“An investor doesn’t know what his mutual fund is worth until the end of the day when the fund’s ‘value’ is posted online, while ETFs have a constant bid/ask spread and trade like a stock,” he explained.
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ETFs are bundled so you can own real estate sector stocks
Armada ETF Advisors invests in publicly traded real estate investment trusts, known as REITs. A REIT is an entity or company that operates, finances or owns income-producing real estate. Auerbach says that publicly traded REITs trade on an exchange, like stocks.
“As a reference point, there are 30 REITs in the S&P 500 currently,” he said. “Any investor can throw a dart against the board and pick their favorites.”
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The advantage for investors, said Auerbach, is that an ETF wrapper gives an investor the opportunity to play 25, 100, 250, 500 stocks in one “stock” and thus only have to pay potential capital gains/losses on one security.
“For us, we are leveraging our deeply experienced REIT management team so that all investors can benefit from the team’s wisdom and experience as stewards of their funds since all we know are REITs,” he said.
In addition, Auerbach noted that the ETF wrapper is “fully transparent” so that investors can look on the company’s website and see what all of its holdings are and also can see what the bid/ask spread is constantly during market hours compared to a mutual fund.
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Understanding the current real estate market’s impact
Armada is taking a big-picture look at what is happening in the housing markets across the country. Auerbach reported that based on the lack of supply for all the demand out there, several REIT sectors benefit from this housing demand including:
- Apartment REITs
- Single family rental REITs
- Manufactured housing REITs
- Senior housing REITs
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“Not everyone may be able to buy a house, but everyone is able to buy a tax-efficient ETF that is playing into this topsy-turvy housing situation,” Auerbach said. “As the only pure-play active Residential REIT ETF currently on the market with a deeply experienced REIT management team, we are able to provide that residential REIT expertise that all investors are able to benefit from through thorough top-down and bottom-up analysis .”