I think there are a few key reasons to consider investing in Vanguard Australian Property Securities Index ETF (ASX: VAP).
What is Vanguard?
Vanguard is a funds management business that is owned by its own investors. It was founded in 1975 and now has (or had) around AU$9.7 billion. It has 192 funds in the US, and 232 funds in markets outside the US. It’s a world leader in providing low cost ETFs.
Some reasons to consider Vanguard Australian Property Securities Index ETF
There are plenty of real estate investment trusts (REITs) on the ASX. But it might be hard to know which one to invest in at what price. This is why the Vanguard Australian Property Securities Index ETF is a good idea to consider. It’s invested in 31 property businesses within the ASX 300 with a median market capitalisation of $8.8 billion at the end of April 2020. The ETF has a management fee of 0.23% per year.
With that in mind, there are some key reasons to consider Vanguard Australian Property Securities Index ETF:
There are obvious risks if you have hundreds of thousands of dollars of your money invested in just one residential or commercial property. One REIT offers a portfolio of properties across different cities and perhaps different countries.
Vanguard Australian Property Securities Index ETF is invested in a portfolio of REITs which each own a portfolio of properties. It’s very diversified with shares like Goodman (ASX: GMG), Scentre (ASX: SCG), Dexus (ASX: DXS), Mirvac (ASX: MGR), GPT (ASX: GPT) and Stockland (ASX: SGP).
REITs are attractive because they can offer a good combination of capital growth and income. Each year the REIT can pay out a lot of the net rental profit that it generates each year.
Whilst the short term distributions from REITs may be affected by the current economic problems, in the future hopefully distributions will return to normal. Based on the trailing distribution yield, the Vanguard Australian Property Securities Index ETF has a yield of 6%.
The ongoing COVID-19 pandemic has caused share prices to drop heavily in the REIT space, despite the interest rate in Australia now being extremely low.
It’s best to buy assets when their assets are lower, as long as you believe that there will be a recovery and ongoing growth. At the moment the Vanguard Australian Property Securities Index ETF is still down around 27% from the price before the COVID-19 selloff.
If I were looking to diversify my portfolio with some property shares then this could be the best way to go at this price.