In late March his firm launched the U.S. Diversified Real Estate ETF (PPTY), which carries a 0.53 percent expense ratio and buys REITs in regions of the U.S. that are posting robust economic growth rates. That approach is distinct from most REIT ETFs which typically pursue a cap-weighted approach to their portfolios. 

REIT investors should seek to avoid the sector’s weakest link: shopping malls. Of the top 10 largest REIT ETFs, the PowerShares KBW Premium Yield Equity REIT Portfolio (KBWY) carries the largest retail REIT exposure, at 23 percent. That may also explain why it is the weakest year-to-date performer in the group, with an 8 percent drop.

The  contrarian view is that mall and strip center REITs are arguably oversold, trading at roughly 20 percent discounts to the value of their assets, according to Green Street Advisors.

Todd Rosenbluth, director of ETF and mutual fund research at CFRA, concedes that you won’t find a whole lot of differentiation among the largest REIT ETFs. He adds that the Vanguard Real Estate ETF will start to look even more like it’s peers, now that it is shifting to a new index that covers specialty REITs such as American Tower and Crown Castle, as the other big funds do. 

That said, a look into the portfolios of the various large ETFs can help you target certain sectors with more precision. The iShares Residential Real Estate ETF (REZ), for example, has a nearly 50 percent weighting in residential real estate companies. For REIT investors interested in especially robust yields, the VanEck Vectors Mortgage REIT Income ETF (MORT) carries a 30-day SEC yield of 10.25 percent.

Interest Rate Head Fake

The recent rise in interest rates doesn’t necessarily portend even higher rates from here. Although the Federal Reserve is expected to hike rates on five or six more occasions by the end of next year, longer-term debt instruments such as 10-Year Treasuries are much more sensitive to the broader economy and may not rise much at all.

For example, when the economy looked poised to grow at a faster pace in 2018 thanks to recently-enacted tax reform, the 10-Year yield surged to 2.94 percent this past February, and it eventually hit 3 percent last week. Since then, the economy has cooled a bit, and this Friday’s monthly employment report, which produced a below-consensus 164,000 net new jobs, has pushed the 10-Year Yield back to 2.93 percent.

If 10-year rates do indeed become range bound, then the larger, more strategic REIT ETFs may resume leadership.

And the Real Estate Select Sector SPDR Fund (XLRE), with its 0.13 percent expense ratio, appears to be a solid choice. Matthew Bartolini, head of SPDR Americas research at State Street Global Advisors, said in an email interview that this is the only REIT ETF that focuses solely on firms in the S&P 500 and, as such, is the most effective fund for specifically tracking and benchmarking to the S&P 500 index.