What are Real Estate ETFs?

Real Estate ETFs are funds that track companies investing in real estate or REITs, giving exposure to property sectors like residential, commercial or industrial. Unlike owning property directly, they trade on exchanges like stocks and hold baskets of companies or instruments, making real estate investing more accessible and diversified. ETFs aim to reflect a specific index's performance but may incur costs, such as expense ratios, affecting returns. Real estate ETFs are common in portfolios as part of income or long-term growth strategies, though investors may review sector weightings to understand diversification.

What is an expense ratio in an ETF?

An expense ratio is an annual fee charged by an ETF to manage its assets, reflected as a percentage of the fund’s net assets. It includes management and administrative costs. A higher expense ratio reduces net returns over time. For example, fund with a 0.08% ratio is slightly costlier than one with 0.07%. Even small differences compound annually, which can impact growth, especially for long-term holdings. It is important for investors to compare expense ratios as part of understanding total cost of investing, and to consider the overall efficiency of a fund's strategy.

What is a dividend yield and how does it affect income from an ETF?

A dividend yield measures annual dividend payments as a percentage of a fund’s price. For real estate ETFs, dividends are crucial as they often distribute income generated by REITs. For example, FREL has a yield of 3.45%, while SCHH yields 2.88%. A higher yield may attract income-focused investors, but it is not the sole indicator of performance. Dividends may fluctuate, depending on underlying holdings' earnings. Investors must also evaluate expense ratios, fund liquidity and overall portfolio alignment, rather than only focusing on dividends, when assessing a fund’s income potential.

What are the key differences in cost between FREL and SCHH?

FREL charges an expense ratio of 0.08%, while SCHH's is 0.07%, making SCHH slightly cheaper. Over time, these differences can compound. For instance, if you invest £10,000, the fund with lower fees (SCHH) retains more value annually. Even a small difference of 0.01% matters in large portfolios. While SCHH's lower cost enhances returns over the long term, it is essential to also consider factors like liquidity and yield before making comparisons. Always evaluate total costs to understand how they affect investment performance in the long term.

How do FREL and SCHH compare in dividend yields?

FREL offers a dividend yield of 3.45%, higher than SCHH's 2.88%. While a higher yield may seem attractive for income, it does not always mean better performance. Yield can be influenced by price changes or underlying REIT earnings. Both funds distribute dividends periodically, typically quarterly, and are subject to tax rules that vary by jurisdiction. Investors must consider these yield differences in the context of risk, fees and long-term investment goals, not just the percentage return, to ensure they align with their overall portfolio strategy.

How do FREL and SCHH compare in terms of fund size?

SCHH has significantly larger net assets of $10.8 billion compared to FREL's $1.5 billion. Larger funds often benefit from higher liquidity, meaning tighter bid-ask spreads, making buying and selling easier. However, size does not guarantee better performance. A smaller fund like FREL can still offer efficient management but may face less liquidity. Investors should consider the trade-off between fund size, liquidity, and how these factors may affect costs and trading experience. Fund size influences the ease of investing but is just one of many factors to weigh.

How similar are the top holdings of FREL and SCHH?

FREL and SCHH share nine of their top ten holdings: WELL, PLD, EQIX, AMT, SPG, DLR, O, PSA, and VMRK. However, their weighting differs slightly. For example, WELL accounts for 9.54% in FREL but 11.14% in SCHH, while PLD is 7.76% in FREL versus 8.71% in SCHH. These similarities suggest both track similar segments of the U.S. REIT market. While both funds invest in comparable companies, subtle differences in weighting may lead to varying returns over time based on sector-specific performance.

How might index-tracking differences affect these funds?

While both FREL and SCHH track real estate indices, their specific methodology details are unavailable. This means investors cannot fully assess how these funds select or weight securities. Index tracking may involve different rebalancing frequency or weighting approaches, which could lead to variations in performance, even with similar holdings. Differences in methodology may affect how closely a fund follows its target index, creating disparities in returns over time. As a result, investors should consider their own goals and risk tolerance when evaluating these ETFs.

How do sector exposures compare for FREL and SCHH?

Sector weightings are not available for FREL or SCHH, which makes it difficult to compare their exposure across various sub-industries like residential or commercial real estate. The absence of sector data limits the ability to assess diversification, as it's unclear how concentrated or distributed investments are within each fund. Without sector data, investors can rely on top holdings for clues. However, understanding sector risks requires more transparency, so investors should monitor future disclosure updates to gain a comprehensive view of potential portfolio differences.

Are there any risks in comparing ETFs based on fees and yields?

Yes, relying solely on fees and yields can be misleading. A low expense ratio, like SCHH's 0.07%, might seem attractive, but fund performance and underlying holdings must also be considered. Similarly, higher yields, as seen in FREL's 3.45%, might not always reflect stronger returns if the fund's holdings are underperforming. Market conditions can influence dividends and fund value. Investors should evaluate total costs, fund liquidity, performance history, and risk factors comprehensively to ensure a balanced comparison and avoid making decisions based on incomplete information.

Should investors consider fund age when comparing FREL and SCHH?

Yes, fund age can offer insights into reliability and track record. SCHH, founded in 2011, has a longer history than FREL, which began in 2015. A longer track record allows investors to review how the fund behaves during market cycles, including downturns. However, age alone doesn't guarantee future performance. Older funds may have established processes but can still underperform in changing markets. Newer funds may be more innovative but have less historical data, making past performance evaluation more challenging for investors to assess.

How should investors decide which REIT ETF suits their goals?

Investors should align fund attributes with their goals. For income-focused strategies, yield and dividends matter. For long-term growth, lower fees, liquidity and fund size can be more important. SCHH's higher liquidity and longer history may appeal to those valuing stability, while FREL's higher yield suits income seekers. Consider your risk tolerance, desired exposure and time horizon. It is crucial to evaluate fund costs, past performance, and holdings. Always consult reliable sources or financial advisors to make well-informed investment decisions tailored to your unique financial situation.

FREL vs SCHH

Two funds, one decision: we compare cost, performance and what each ETF actually holds in October 2026.

This page compares Fidelity Covington Trust MSCI Real Estate Index ETF (FREL) and Schwab U.S. REIT ETF (SCHH). It reviews expense ratios, net assets, dividend yields, top holdings, and how each fund tracks its market. Note that index focus details are not available for either fund. Educational content, not financial advice.

Fund Snapshot

Key Fund Metrics

FREL

Metric

SCHH

0.08%

Expense Ratio

0.07%

3.45%

Dividend Yield

2.88%

$1.48B

Net Assets

$10.85B

128

Holdings

120

Feb 2, 2015

Inception Date

Jan 13, 2011

–

Index Tracked

–

Real Estate

Fund Category

Real Estate

SCHH costs about $1.00 less per year for every $10,000 invested.

Shared Top Holdings

Holding	FREL	SCHH
WELLWelltower Inc.	9.54%	11.14%
PLDPrologis, Inc.	7.76%	8.71%
EQIXEquinix, Inc.	5.59%	4.29%
AMTAmerican Tower Corporation	4.68%	4.34%
SPGSimon Property Group, Inc.	4.34%	4.53%
DLRDigital Realty Trust, Inc.	4.09%	4.62%
ORealty Income Corporation	3.46%	3.85%
PSAPublic Storage	3.37%	3.64%
VMRKVivmark Residential	3.04%	3.33%

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REET vs SCHH

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Investment Analysis

FREL

Pros

The fund offers a low expense ratio of 0.08 per cent, minimising costs for investors in this real estate ETF.
With $1.5 billion in net assets, the fund maintains sufficient scale to ensure reliable trading liquidity for investors.
The ETF provides a dividend yield of 3.45 per cent, offering a relatively attractive income stream for holders.

Considerations

Index methodology details are currently unavailable, limiting transparency regarding the specific tracking approach used by the fund.
Sector weightings are not available, making it difficult to assess diversification and concentration risks within the portfolio.
The fund's inception in 2015 means it has a shorter track record compared to older real estate ETFs.

SCHH

Pros

The fund's expense ratio is a low 0.07 per cent, providing cost-efficient exposure to the U.S. REIT market.
With $10.8 billion in assets, the ETF benefits from significant scale, which typically supports tighter bid-ask spreads.
Since its inception in 2011, the fund has established a longer track record than many comparable real estate ETFs.

Considerations

The dividend yield of 2.88 per cent is lower than some alternatives, potentially reducing income appeal for investors.
Specific index methodology information is not available, hindering a full understanding of the fund's tracking strategy.
Sector weightings are not available, obscuring the precise distribution of assets across different real estate sub-industries.

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About FREL and SCHH

FREL (FREL)

The Fidelity Covington Trust MSCI Real Estate Index ETF (FREL) is an exchange-traded fund designed to offer investors exposure to the real estate sector. With net assets of USD 1.48 billion, this fund provides a diversified approach by holding 128 different real estate assets. Investors might be drawn to its low expense ratio of 0.08%, which helps keep costs manageable over time. The fund, established on 2 February 2015, has a reported dividend yield of 3.45%, making it a potential option for those seeking regular income, although dividends are not guaranteed. It’s important to note that the value of real estate investments can fluctuate due to various market conditions and interest rates. While FREL offers a straightforward way to invest in real estate through the stock market, investors should be mindful of the inherent risks and consider their own financial situation before investing. Remember, all investments carry risk, and returns are not guaranteed.

SCHH (SCHH)

Schwab U.S. REIT ETF (SCHH) is a passively managed exchange-traded fund that seeks to track the Dow Jones U.S. Select REIT Index, offering diversified exposure to US real estate investment trusts (REITs). It typically holds publicly traded REITs spanning sectors such as residential, industrial, retail, office and specialised property types, and distributes rental-derived income as dividends. As an ETF, SCHH provides intraday liquidity and a convenient way to gain broad real-estate exposure without picking individual stocks, but it remains concentrated in the property sector and is sensitive to interest-rate moves and economic cycles. Investors should weigh potential dividend income against capital volatility, tax treatment of REIT distributions, fees and tracking error. This is general educational information only and not personal advice; values can rise and fall and past performance is not a guide to the future. Consider your objectives and consult a financial adviser for suitability.

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FREL vs SCHH

Fund Snapshot