Fundrise vs. Vanguard REIT ETF

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eternalsands
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Fundrise vs. Vanguard REIT ETF

Post by eternalsands » Thu Jul 05, 2018 1:42 pm

Whilst researching alternative investment avenues I came across this article on Fundrise website that compares Fundrise REIT with Vanguard. This is the link to the article.

https://fundrise.com/education/blog-pos ... ent-option


It will be interesting to see what people on this forum think of this analysis.

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Nate79
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Re: Fundrise vs. Vanguard REIT ETF

Post by Nate79 » Thu Jul 05, 2018 4:57 pm

Thanks for posting the excellent material. I started putting about 10% of my monthly investment contributions into Fundrise as a diversification and to get exposure more closely resembling the real estate rental market. The alternative was to diversify into the rental market directly but I decided to go this direction instead.
Last edited by Nate79 on Thu Jul 05, 2018 7:06 pm, edited 1 time in total.

HippoSir
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Re: Fundrise vs. Vanguard REIT ETF

Post by HippoSir » Thu Jul 05, 2018 6:10 pm

Why should I trust an article from the very owner of the product they're trying to sell to me?

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Re: Fundrise vs. Vanguard REIT ETF

Post by abuss368 » Thu Jul 05, 2018 6:39 pm

This article was written by Fundrise!
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Nate79
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Re: Fundrise vs. Vanguard REIT ETF

Post by Nate79 » Thu Jul 05, 2018 7:06 pm

For someone who invests in Fundrise I would be interested if someone has actual feedback on the content not the obvious detail that yes this is written by Fundrise (it's on the website....).

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Re: Fundrise vs. Vanguard REIT ETF

Post by venkman » Thu Jul 05, 2018 10:04 pm

On the surface, Vanguard charges no brokerage commissions and carries only a low investment advisory fee of 0.30%, which it reports to be lower than the industry standard of 1.02%. In addition to the advisory fee, Vanguard charges its REIT ETF investors an asset management fee of 0.11% as well as reimbursement of “expenses.” These expenses cover capital needed by Vanguard to operate its investment offerings, such as employee salaries, financial auditing and legal expenses.
In comparing themselves to VNQ, Fundrise's calculations ASSUME that you're paying an extra .30% for Vanguard's PAS.

That should tell you all you need to know about the accuracy of the article.

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eternalsands
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Re: Fundrise vs. Vanguard REIT ETF

Post by eternalsands » Mon Jul 09, 2018 3:27 pm

Nate79 wrote:
Thu Jul 05, 2018 7:06 pm
For someone who invests in Fundrise I would be interested if someone has actual feedback on the content, not the obvious detail that yes this is written by Fundrise (it's on the website....).
Yes, that was my original intent on starting this thread. Thanks, Nate79!

It is quite obvious that the article will have a bias and as it was mentioned by someone here that they have assumed a PAS of 0.30 but perhaps some more detailed discussions will be useful in determining how to view and investment into Fundrise in one's overall asset allocation.

Many do not have the wherewithal or the bandwidth to participate in the real estate sector more actively and I am struggling to place this in an asset category.

Should Fundrise be compared to a REIT and then compare performance?
Should fundrise be compared to holding real estate (property ownership-landlord-rental income)?

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Re: Fundrise vs. Vanguard REIT ETF

Post by Fclevz » Mon Jul 09, 2018 3:43 pm

Non-traded and limited monthly liquidity was as far as I needed to read. I’m out.

What’s the old saying? Don’t buy an investment that doesn’t have a price quote in the Wall Street Journal.

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Re: Fundrise vs. Vanguard REIT ETF

Post by Nate79 » Mon Jul 09, 2018 5:47 pm

Fclevz wrote:
Mon Jul 09, 2018 3:43 pm
Non-traded and limited monthly liquidity was as far as I needed to read. I’m out.

What’s the old saying? Don’t buy an investment that doesn’t have a price quote in the Wall Street Journal.
Ok, so you won't buy a house nor rental property, CDs, nor annuities. I'm probably forgetting other products that have limited liquidity. Even savings accounts have limits on number of transactions. If you are investing for the long term the limited liquidity doesn't bother me for a small portion of my portfolio as I'm in it for the long term, not a checking account.

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Re: Fundrise vs. Vanguard REIT ETF

Post by aristotelian » Mon Jul 09, 2018 6:43 pm

eternalsands wrote:
Mon Jul 09, 2018 3:27 pm

Should Fundrise be compared to a REIT and then compare performance?
Should fundrise be compared to holding real estate (property ownership-landlord-rental income)?
I don't think anyone knows. Therein lies the problem. I would not put money in anything that is not well understood and/or does not have a proven track record. Keep in mind that Fundrise is a specific platform, not an asset class.

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Re: Fundrise vs. Vanguard REIT ETF

Post by not4me » Tue Jul 10, 2018 12:15 pm

eternalsands wrote:
Mon Jul 09, 2018 3:27 pm

Should Fundrise be compared to a REIT and then compare performance?
Should fundrise be compared to holding real estate (property ownership-landlord-rental income)?
I only skimmed the info, so this may be slightly off, but it struck me as "just another non-traded REIT". As investments tend to be, there are trade-offs & niches carved. Should it be compared to a REIT? I'd be more specific & say it should be compared to a non-traded REIT...that would exclude Vanguard of course. Among likely several things, you trade liquidity/diversification/etc for advantages to being smaller/more nimble & targeted/etc. I assume when you ask should it be compared to 'holding real estate' you mean direct ownership...in which case no, you trade away control & hands on participation. I didn't see the info on Fundrise fees, etc to feel that I read a "real" comparison

This isn't meant to say whether Fundrise is "right" for anyone specifically

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Vanguard vs. Fundrise: Which is the Better Investment Option?

Post by sillysaver » Sat Sep 29, 2018 11:00 am

[Thread merged into here, see below. --admin LadyGeek]

Loaded question. I can guess the answer (considering the source):

https://fundrise.com/education/blog-pos ... ent-option

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Nate79
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Re: Vanguard vs. Fundrise: Which is the Better Investment Option?

Post by Nate79 » Sat Sep 29, 2018 11:07 am

sillysaver wrote:
Sat Sep 29, 2018 11:00 am
Loaded question. I can guess the answer (considering the source):

https://fundrise.com/education/blog-pos ... ent-option
Previously discussed here:


viewtopic.php?t=253268

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Re: Vanguard vs. Fundrise: Which is the Better Investment Option?

Post by nisiprius » Sat Sep 29, 2018 11:43 am

We're specifically talking about a way of investing in REITs, which are constitute 3.60% of the stock market and are thus a narrow sector. So the first question is whether there are benefits in overweighting REITs in a portfolio of stocks. Having raised the question I'll say "it's in the land of 'maybe so, and then, again, maybe not, but it's a fairly popular idea'" and then move on.

The Vanguard fund and ETF are both forms of investment company, regulated by the Investment Company Act of 1940 and affording various protections to investors under that act. We are so used to mutual funds and ETFs that we don't always appreciate what they do. What they do includes: investing mostly in liquid issues that can be valued accurately daily; guaranteed daily liquidity at NAV; and all assets held by an independent custodian bank.

It is not crystal-clear to me exactly what "Fundrise" really is. They say they are a registered investment advisor, and say (misleadingly) that Vanguard is, too. No, Vanguard is not, only Vanguard's personal advisors services are.

I think a Fundrise investment is basically a novel form of a) an individual (b) non-traded REIT. By comparison VGSIX, VGSLX, VNQ are portfolios of a) 185 REITs that are b) traded on the market and thus have constant market pricing.

A couple of things do stand out. They say in so many words that
As [eREITs] are non-traded, they generally have less liquidity than REITs that are publicly traded.
And if they are non-traded, there are questions about the accuracy of the NAV. Indeed, they say:
While NAV may be used to determine the Redemption Price of a share, it is only an estimate of value and the actual market price that someone would pay for such a share may vary widely.
Now, I think this is a real red flag (or, in this case, a light gray flag):
The publicly filed offering circulars of the issuers sponsored by Rise Companies Corp., not all of which may be currently qualified by the Securities and Exchange Commission, may be found at fundrise.com/oc
Oh, you too? Here, borrow my magnifying glass:
The publicly filed offering circulars of the issuers sponsored by Rise Companies Corp., not all of which may be currently qualified by the Securities and Exchange Commission, may be found at fundrise.com/oc
In short, "you're a big boy, you know how to take care of yourself investing in issues not qualified by the SEC, here's a website, go perform your due diligence on each of the issues you are investing in."

I think questions like "what does 'less liquidity' and 'NAV is only an estimate' mean to me..." and "do I want to invest in non-traded REITs" are more important than trying to figure out if Fundrise's effective expense ratio is lower than 0.12%.
Last edited by nisiprius on Sat Sep 29, 2018 12:06 pm, edited 7 times in total.
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Re: Fundrise vs. Vanguard REIT ETF

Post by LadyGeek » Sat Sep 29, 2018 11:50 am

I merged sillysaver's thread into the on-going discussion.
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Re: Fundrise vs. Vanguard REIT ETF

Post by Nate79 » Sat Sep 29, 2018 11:59 am

Comparing Fundrise vs Vanguard is really apples to oranges. Fundrise is more similar to one of the underlying holdings of the Vanguard REIT vs the Vanguard REIT index fund itself. I have tested the waters of Fundrise with a little money for last 9 months and have zero interest in just holding Vanguard REIT.

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Re: Fundrise vs. Vanguard REIT ETF

Post by sillysaver » Sat Sep 29, 2018 3:17 pm

LadyGeek wrote:
Sat Sep 29, 2018 11:50 am
I merged sillysaver's thread into the on-going discussion.
Sorry for the duplicate. Thanks for the merge.

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Re: Fundrise vs. Vanguard REIT ETF

Post by leftcoaster » Mon Aug 05, 2019 9:01 am

Nate79 wrote:
Sat Sep 29, 2018 11:59 am
Comparing Fundrise vs Vanguard is really apples to oranges. Fundrise is more similar to one of the underlying holdings of the Vanguard REIT vs the Vanguard REIT index fund itself. I have tested the waters of Fundrise with a little money for last 9 months and have zero interest in just holding Vanguard REIT.
How’s that going?

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Re: Fundrise vs. Vanguard REIT ETF

Post by Sandtrap » Mon Aug 05, 2019 9:35 am

venkman wrote:
Thu Jul 05, 2018 10:04 pm
On the surface, Vanguard charges no brokerage commissions and carries only a low investment advisory fee of 0.30%, which it reports to be lower than the industry standard of 1.02%. In addition to the advisory fee, Vanguard charges its REIT ETF investors an asset management fee of 0.11% as well as reimbursement of “expenses.” These expenses cover capital needed by Vanguard to operate its investment offerings, such as employee salaries, financial auditing and legal expenses.
In comparing themselves to VNQ, Fundrise's calculations ASSUME that you're paying an extra .30% for Vanguard's PAS.

That should tell you all you need to know about the accuracy of the article.
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In this case, selling thier own product.

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Re: Fundrise vs. Vanguard REIT ETF

Post by Nate79 » Mon Aug 05, 2019 9:53 am

leftcoaster wrote:
Mon Aug 05, 2019 9:01 am
Nate79 wrote:
Sat Sep 29, 2018 11:59 am
Comparing Fundrise vs Vanguard is really apples to oranges. Fundrise is more similar to one of the underlying holdings of the Vanguard REIT vs the Vanguard REIT index fund itself. I have tested the waters of Fundrise with a little money for last 9 months and have zero interest in just holding Vanguard REIT.
How’s that going?
I have been with Fundrise since April 2018. I justed checked on the site to see the current performance and what their past performance shows. During most of that time I have been doing a monthly contribution to the "Long Term Growth" portfolio. During that time (a little over 1 year) I have earned about 6%. Overall Fundrise portfolios returned 9.11% in 2018 and their average 5 year CAGR is 10.79%.

What I like about Fundrise is in the last ~1 year they have improved their information to investors (like current state of the real estate market) as well as improved their reporting of return. For example they recently reported that investing in real estate right now is very challenging for new deals and they are being very careful to select good deals (lots of capital chasing deals, propped up asset values and low yields). They also did an IPO for existing investors but I didn't participate in that.

So far I'm happy and continue to invest regularly for the diversification. I do not (yet) want to own rental real estate and this gives me the diversification I'm looking for.

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Re: Fundrise vs. Vanguard REIT ETF

Post by garlandwhizzer » Mon Aug 05, 2019 1:54 pm

This is an advertisement disguised as a objective analysis. Personally I have no interest in Fundrise or anything else with a 0.85% expense fee + 0.15% advisor fee. This advertisement is designed to generate business and profits for Fundrise, a sales pitch that aims at less sophisticated investors who are often easier to fleece.

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