Can someone help clarify how a real estate ETF works?
Given that real estate is tangible, whereas ETFs traditionally track intangible assets (stocks), how are real estate ETF valued if they are tangible goods? This feel like a dumb question.
In: Economics
ETFs are just a mutual fund that “acts” like a stock. You can bundle any type of basket of companies into one you want. Or commodities or anything. ETFs aren’t special. Mutual funds and them are very very similar, almost totally thr same. ETFs are kinda mutual funds v1.1.
Real estate companies generally do two main things. Collect rent and their assets (real estate) goes up in value. They don’t need to “make” anything to have value and create wealth and go up in value.
Additionally there is a subset of real estate investments called REITs (Real Estate Investment Trusts) that have special rules. Basically you can invest in these companies and they are legallly required to pay dividends to their owns a certain amount of their income. It’s more or less like you’re buying in as a landlord for the properties they own, they collect rent and pay it to you each quarter like you’re a part owner landlord.
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