Fundrise eREIT or an ETF?

Fundrise eREIT or an ETF?
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#1

I am a first time investor looking to grow $500 dollars. I am currently deciding between opening a Fundrise eREIT or a Vanguard Total Stock Market ETF. I am not sure which option will get me the highest dividends in these next two or so years. I also am not sure about the stability of investments of either with like liquidity and market downturns. Also which option will allow me to withdraw and add money into the investment freely as well? Any suggestions?


#2

Hi @mielock.ethan and welcome to the NerdWallet community!

We’ve written about both investments, so you can read more about both of them at the links below. I will say that with the Vanguard ETF you’re investing in more than 3,600 companies – and that diversity alone is going to help reduce volatility. That said, it’s an all-stock ETF and of course market gyrations are going to affect its short-term performance. But if your plan is to invest and leave your money for the long term – which is the best plan with any stock investment – then you can wait out those short-term dips and watch as returns over time grow your money.

With the Fundrise eREIT, you’re investing of course in real estate, and that can mean you’re getting diversification from stocks. But private REITs (not traded on the stock market) come with their own risks, the biggest one being that a market doesn’t exist for the shares when it comes time to sell, though Fundrise’s platform does offer a sort of middle ground. There are also fees to consider – they’re likely to be higher than what you would pay for a Vanguard ETF.

Here’s our review of Fundrise:

And here’s our overall review of Vanguard index funds (note that ETFs are mentioned here only – the review focuses on traditional mutual funds): https://www.nerdwallet.com/blog/investing/vanguard-index-funds/

Hope that helps a bit.


#3

Thanks Andrea, this does seem to help. I read your review of Fundrise and I think I will go with the account and take my chances. I am looking for shorter term investing (1-3 years) with an easy to use trading interface. I definitely see Vanguard ETFs as the clear choice for longer investing though.


#4

@acoombes good review on Fundrise. To narrow down the question. Why would I invest in fundrise over a publicly traded REIT EFT of my choice. Fundrise talks about lower fees, but might be tougher to get out of the investment…trying to figure out if it’s worth it.


#5

Hi @gregg – As you note, Fundrise says investors will enjoy much lower fees overall with its approach, essentially because there are fewer intermediaries in the Fundrise process vs. a REIT ETF. But unfortunately it’s essentially impossible, from what I can tell, for individual investors to compare fees between the two types of investments, mainly because the real-estate investment deals are complex and relatively opaque to the individual investor.

I think in this situation an investor has to think about his/her goals for the money invested, and assess the risks and potential rewards of each investment type. Our Fundrise review outlines some of the risks of that model, and this article and this one do the same for REITs.