What is the definition of a real estate investment according to S&P 500?

[jIMOh]

According to sources the S&P500 is 2.9% real estate.

What is the difference between a REIT and what an index fund holds as a real estate investment?

https://www.thebalance.com/what-is-the-sector-weighting-of-the-s-and-p-500-4579847

I own USRT ETF in my Roth and traditional IRAs, and was trying to understand if this overlaps what is held in the index, or is different from what is held in the index.

 

[OldShooter]

First, be very careful when generalizing "an index fund." There are a lot of crazy funds out there where the hucksters have included the word "index." Around here the term is generally used in connection with broad funds like S&P 500 or, even more commonly, total market funds.

That said, and more to your specific question, an S&P 500 fund will hold the REITs that are in the index. Nothing more complicated than that. So if REITs are 2.9% of the S&P market capitalization then they will be 2.9% of the fund. If you can find a list of what is in the S&P you can pick out the exact REITs that every S&P 500 fund will hold.

If you also hold individual REITs, then your portfolio may have a real estate "tilt" relative to the S&P. There are many flavors of REITs, too, so what you hold may represent some diversification or you may simply hold more of some of the REITs that are in the index. That's impossible to know without examining each REIT carefully.

 

[jIMOh]

index=S&P500 based on thread title, I did not type the first post correct and qualify where I said index was S&P500 .

Meaning I am trying to understand is what is in the S&P500 for real estate? REITs, home builders, or some other mechanism for representing the real estate aspect of the economy?

 

[OldShooter]

... Meaning I am trying to understand is what is in the S&P500 for real estate? REITs, home builders, or some other mechanism for representing the real estate aspect of the economy?

Like I said, get the list of stocks in the S&P 500 and study it for the answer to your question. Nobody is going to do that for you.

 

[Running_Man]

REIT Membership in S&P Equity Indexes
https://www.reit.com/data-research/reit-indexes/reits-sp-indexes

Company Name Ticker Entrance Date
S&P 500
AIMCO AIV 3/13/2003
Alexandria Real Estate Equities ARE 3/20/2017
American Tower Corp. AMT 11/16/2007
AvalonBay Communities AVB 1/9/2007
Boston Properties BXP 3/31/2006
Crown Castle International CCI 3/14/2012
Digital Realty Trust DLR 5/17/2016
Duke Realty Corporation DRE 7/26/2017
Equinix, Inc. EQIX
Equity Residential EQR 11/1/2001
Essex Property Trust ESS 4/1/2014
Extra Space Storage EXR 1/15/2016
Federal Realty Investment Trust FRT 1/29/2016
HCP, Inc. HCP 3/31/2008
Host Hotels & Resorts HST 3/19/2007
Iron Mountain IRM 1/5/2009
Kimco Realty Corporation KIM 4/3/2006
Macerich MAC 5/8/2013
Mid-America Apartment Communities, Inc. MAA 12/1/2016
Prologis PLD 7/16/2003
Public Storage, Inc. PSA 8/18/2005
Realty Income Corporation O 4/6/2015
Regency Centers REG 3/2/2017
SBA Communications Corp. SBAC 9/1/2017
Simon Property Group SPG 6/25/2002
SL Green Realty Corp. SLG 12/23/2008
UDR UDR 3/4/2016
Ventas, Inc. VTR 3/4/2009
Vornado Realty Trust VNO 8/11/2005
Welltower, Inc. HCN 1/30/2009
Weyerhaeuser WY 3/31/1964

 

[Running_Man]

The REIT's in the S&P500 but not in Ishares US REIT ETF ARE:
American Tower Corp. AMT
Crown Castle International CCI
SBA Communications Corp. SBAC
Welltower, Inc. HCN
Weyerhaeuser WY

THE REIT ETF of course has more than 175 REITS so it is far more complete than the S&P500

 

[Running_Man]

See answer in italics

According to sources the S&P500 is 2.9% real estate.

What is the difference between a REIT and what an index fund holds as a real estate investment?
The S&P500 index is only holding the largest REITS, a REIT index fund holds many smaller REITS as well. REITS were added to the S&P500 after lobbying by many of the top investors in REITS in order to be able to have an allocation of the indexing funds. After overperforming the S&P500 for years the S&P committee decided to include them as first part of financials and then after they continued their overperformance, gave them there own secotr in 2016. Bank of America was at the forefront of this effort in able to add REITS to the S&P500 and was able to succeed by showing REITS increased from 1999 to 2001 by 39% while the S&P fell and convinced the committee felt it would help mitigate bear market results.
https://www.thebalance.com/what-is-the-sector-weighting-of-the-s-and-p-500-4579847

I own USRT ETF in my Roth and traditional IRAs, and was trying to understand if this overlaps what is held in the index, or is different from what is held in the index.

 

[triangle]

The definition of a REIT was established by congress by enacting some specific tax treatment years ago. Making them different from stocks, bonds, or limited partnerships. A home builder like DR Horton (DHI) is not a REIT while some in in the cloud computing infrastructure such as Digital Reality Trust (DLR) are for example.

It could get complicated determine a precise S&P 500 weighting of REITs or real estate in general considering that a company like Berkshire has some investments in REITs and many companies own substantial real estates assets without being a REIT (For example a few years ago there was some activist activity in trying to get Macy's to spin off some of its property as a REIT and then pay rent to the spinoff...I did not follow that story to its conclusion, but it was part of their grand scheme to "unlock" value).

Recently REITs became their own sector within the S&P 500:
https://www.smith-howard.com/reits-split-off-into-new-sp-sector/

 

[Running_Man]

index=S&P500 based on thread title, I did not type the first post correct and qualify where I said index was S&P500 .

Meaning I am trying to understand is what is in the S&P500 for real estate? REITs, home builders, or some other mechanism for representing the real estate aspect of the economy?

There is no attempt by S&P to represent the economy, they just pick 500 or more of the largest stocks that they think would make a good index representative of the largest stocks in the US stock market, they use to include foreign stocks but that got too hard so they decided to exclude them and create another index for foreign stocks. Bunch of guys made them a presentation over a few years and they pick a few of the largest of them. Size and making money year after year is what they are after for the index