Exploring the Battle of Investments: Fundrise and VNQ Uncovered

Looking to get into real estate investing but don’t know where to start? Well, our article might help. Today, we’ll explore real estate investing through two popular platforms – Fundrise and VNQ, and help you pick the one that could best suit your needs.

In the past, only those with deep pockets could invest in real estate. But now, platforms like Fundrise and REITs (Real Estate Investment Trusts) like VNQ can get you into the game with much less.

Fundrise, active since 2012, is a leading platform in the world of electronic REITs, or eREITs. It allows you to invest in commercial and private real estate projects like multi-family condos and office spaces. With an average investment of $5,000, you can potentially earn annual returns of 10 to 14%, making it an attractive option for new investors or those looking to dip their toes in real estate.

Then there’s VNQ, a real estate index fund by Vanguard. Vanguard’s reputation for low-cost investing has stood since 1975. VNQ, as a Vanguard’s product, sticks to this logic, making it robust for long-term real estate investments.

Okay, great, but what’s different between Fundrise and VNQ?

Well, while Fundrise offers eREITs, VNQ is a publicly traded REIT.

What does this mean? Publicly traded REITs like VNQ are bought and sold on a stock exchange, just like any other stock. This provides greater flexibility but often comes with higher fees. On the other hand, eREITs by Fundrise are not traded on stock exchanges and can only be sold back to the company.

Each platform has its own investment minimums. Fundrise’s minimum can be as low as $10 in their ‘Starter’ tier, while VNQ lets you invest in a minimum of one share.

When it comes to past performance, the average return over a seven-year period for Fundrise was 11.64%, while for VNQ it was 10.64%. However, keep in mind that past performance doesn’t guarantee future returns.

One essential aspect to consider is fees. Fundrise charges a 0.15% annual advisory fee plus an 0.85% annual flat management fee for their real estate funds. VNQ, on the other hand, does not have fees for buying, selling, and even boasts a low expense ratio of 0.12%.

As with any investment, both platforms have their pros and cons. Fundrise offers low minimum investment, transparent fees, reasonable management fee, automatic dividend reinvestment, and retirement account options. However, it has limited liquidity and tax implications. While VNQ offers no buy or sell fee, low expense ratio, quarterly dividends, and flexibility, it has an overall lower performance compared to Fundrise.

In conclusion, if you’re a first-timer with limited funds, Fundrise can be a good start. But if you’re after dividend income and long-term growth, VNQ might be a better fit. Remember, whether you go for Fundrise or VNQ, always ensure it aligns with your investment goals and portfolio diversification strategies.