I have recently read an excellent post on just how to be a quant it describes a scientific method of developing trading strategies by the turinginance website,. Real estate a good diversifier in a portfolio - Some investors look at the high distribution yield for income as the primary benefit of REIT ETFs. But long term investors, who follow the strategy of rebalancing into a fixed asset allocation (see our Rebalancing what, why and how and model portfolios we have suggested - Straightforward , Swensen Seven , Smart Beta ), look to the diversification benefits of REIT ETFs. We often favour the particular advantage of the lower MER, but all depends upon the continuance of at least acceptable functionality of holdings that are big Riocan and H&R.
We can see this by using 's calculator to find that XRE (enter the symbol ) over the previous twelve years has a 0.53 correlation with XIU (enter ) and a -0.05 correlation with XBB (enter ), the iShares extensive Canadian bond ETF The numbers vary somewhat for different time periods but XRE has had consistently low correlation with XIU and XBB i.e. away from the 1.0 mark which indicates Dynamic Asset Allocation the whole perfect correlation coefficient that we do not need.
Read some excellent, straightforward explanations of how this comes about by Canadian Capitalist or Canadian Couch Potato or in one of Vanguard's FAQs Vanguard's VRE portfolio is producing the income - see the blue bordered cells in the table that show the low trailing distribution return of 1.8% along with the 5.4% return of the portfolio holdings. The income will be doled out by the ETF, it's merely that as the ETF grows, the investor benefits from capital gains rather than cash income.