IYR, the trading symbol of the iShares U.S. Real Estate ETF, is one of the most easily accessible options for beginner investors to gain exposure to a broad selection of U.S. real estate stocks, with over 70 U.S. shares held by the IYR exchange traded fund (ETF).
Since its launch in 2000, IYR has grown its assets to over $2.7 billion, helping spread its fixed expenses over a wide asset base. As a result, IYR remains a low-cost (expense ratio of only 0.4%) option for investors of all sizes, from individuals just getting started in investing to institutions with decades of experience in the markets, to track the investable real estate stock universe in the United States.
In this article, we’ll share tips for choosing a stock broker to buy the IYR ETF, provide a step-by-step guide to help you make your first purchase, highlight data provided by the ETF sponsor Blackrock, delve deeper into the reporting structure of IYR, and more!
How to buy the IYR ETF (Step-by-step guide)
1. Choose a good stock broker
Since IYR is among the largest ETFs tracking U.S. real estate stocks, you can choose from many brokers to help you purchase. That said, consider the terms offered by each broker and ensure the broker you pick works with residents of your country. Below, we highlight four brokers that offer IYR:
|Broker||Stock commission, US||Minimum Deposit||Available countries|
|Interactive Brokers||Free for US investors. Up to $0.0035 per share with a minimum of $0.35 for international investors||$0||Worldwide – exceptions apply.|
|Public.com||$0||$0||US and UK|
|Webull||$0||$0||US, Hong Kong, China, Singapore, Japan, UK, Australia|
2. Open and fund your account
Once you have weighed the pros and cons of each broker, you are all set to open an account. The process usually takes a few days as the broker verifies your identity. After the process is finalised, you must deposit money into your account.
3. Place a “Buy Order”
If you have found an online broker that suits your needs, managed to open an investment account, and made the initial deposit, you are all set to buy your ETF. All you have to do is find the ETF within your chosen broker and place a buy order. For this example, we will use the mobile version of Interactive Brokers GlobalTrader:
a) Search for iShares U.S. Real Estate ETF ( or the ticker “IYR”) and select it from the list:
b) Click “Buy”:
c) Choose the order details. Now, it’s time to choose how to invest:
The three most important order parameters to set are:
- Type of order: By default, Interactive Brokers sets your order type as Limit, short for Limit order. This is good since it allows you to set a maximum price at which you are willing to buy the shares. The alternatives are a Market order, which will purchase your shares at the best available price immediately, and a Stop order, which is a more sophisticated order – it will enter a market order once a specific stop price is reached (in our example above, you may set the stop price anywhere below $83.47, for instance at $81).
- Limit price: Assuming you kept the “Limit” as the type of order, you need to set the maximum price you are willing to pay per share. If you use Market order, you do not need to fill this and will buy at the best available Ask price. If you use a Stop order, you need to set a Stop price.
- Shares: Here, you define the number of shares you want to purchase; alternatively, you may set a dollar amount instead.
Additionally, Interactive Brokers GlobalTrader allows you to set two more parameters that are not as important:
- TIF: Short for time in force. This option shows how long your order will remain active. It is set to Day by default, meaning it will get cancelled unless executed by the end of the day. The alternative is Good ‘Til Cancel, which means the order will be active for up to 90 days or until you cancel it manually.
- Market Hours: This option shows in which time interval your order will be valid. The default option is Extended, meaning your order participates in trading during regular trading hours, as well as before and after the regular opening hours of the exchange. However, while IYR is one of the more liquid ETFs, trading in extended hours is often associated with larger bid-ask spreads and illiquidity, especially for smaller companies. Hence, you may want to change the default option to Regular, meaning your order participates in trading only during the regular opening hours of the exchange, when trading is most liquid. The last option is Overnight, which means your order only participates in trading after regular hours but before the exchange opens on the next day.
d) Preview the order: Finally, it is a good idea to click Preview and double-check everything is in order. A new window will appear:
e) Place the order: Once double-checking the order parameters, close the preview window (tap anywhere outside it or click Cancel) and drag Slide to Buy to the right to finish the process.
IYR, or the iShares U.S. Real Estate ETF, is an ETF that tracks the Dow Jones U.S. Real Estate Capped Index, a United States-focused index that follows the performance of real estate investment trusts (REITs) and other companies that operate in the real estate sector. You can learn more about the benchmark index on its dedicated website here.
IYR is well diversified (the ETF holds over 70 different stocks), with the largest individual holdings being the top U.S. REITs such as:
- Prologis with a weight of ~9.65%
- American Tower with a weight of ~7.15%
- Equinix with a weight of ~5.90%
As a result, the top 10 individual holdings of IYR currently account for ~46% of the ETF’s total exposure.
Since Dow Jones U.S. Real Estate Capped Index weights and composition change constantly as prices move and new companies are added or deleted (the index is rebalanced annually in September, with quarterly reviews in December, March, and June), you can find detailed information on IYR’s holdings on its dedicated website, available here.
From a sector perspective, IYR is heavily tilted toward Industrial REITs, which account for ~13.33% of ETF assets, followed by Telecom Tower REITs at 12.73% and Retail REITs at 11.0%:
The good thing about the IYR is that it is an excellent, low-cost (expense ratio of 0.4%) investment vehicle for beginner and entry-level investors, as all changes needed to track the performance of the Dow Jones U.S. Real Estate Capped Index are automatically carried out by Blackrock, which manages the ETF. You only need to allocate capital to the ETF and (hopefully) watch it grow. IYR also pays dividends quarterly.
Blackrock’s website keeps track of some key statistics of IYR:
The two key ratios reported above are:
- Price/Cash flow, or P/CF. A measure of the company’s cash flow relative to its market capitalisation.
- Price/Book Ratio, or P/B. A measure of the company’s accounting value relative to its market capitalisation.
It is worth noting that US REITs depreciate their real estate just as one would depreciate a piece of machinery over time. However, unlike machinery, real estate tends to hold its value better over time (think of what house prices were 20 years ago!). This accounting treatment lowers profits. Furthermore, depreciation also lowers book value (i.e., the P/B ratio above may look elevated). Since depreciation is a non-cash expense, REITs often have cash available for distribution to shareholders above accounting profits. Hence, the P/CF is arguably the most useful metric as it is unaffected by depreciation.
Last but not least, If you want to expand your U.S. real estate allocation with a diversified real estate exposure to markets outside the United States, you may want to consider another Blackrock fund:
- iShares International Developed Real Estate ETF (ticker IFGL), which invests in over 250 international real estate companies. Largest holdings include Mitsui Fudosan at 3.75%, Vonovia at 3.08% and Mitsubishi Estate at 2.8%. The ETF distributes dividends, and the expense ratio stands at 0.48%.
IYR’s Financials and Performance
Once you have purchased IYR ETF shares, keeping track of how IYR is doing relative to other ETFs is a good idea. Doing so will give you greater insight into whether to add to your position, hold it, or sell it to pursue better opportunities elsewhere.
Apart from Blackrock’s dedicated website (available here), there are specialised platforms to help you understand how IYR is doing financially. One platform you can use is Koyfin – you can access ETF Holdings, Sector and Industry breakdowns, Dividend history, and more! Get a 20% discount on Koyfin.
For example, Koyfin allows you to quickly identify top-performing REITs among IYR’s holdings:
That said, while such platforms cannot substitute your research 100% of the time, they can be very useful tools in the research process, saving you time and providing new investment ideas.
Who is Blackrock?
Blackrock is the largest asset manager in the world, with total assets under management of over $9.4 trillion. You can read the company’s complete history here. Some key facts about the company are:
- Blackrock was founded in 1988.
- Blackrock went public in 1999.
- It has been the largest asset manager since 2009.
- It has over 19,000 employees.
Since Blackrock is a public company (you can access its investor relations section here), it is easy to track its financials. Hence, it is fair to say Blackrock is one of the safest options when choosing an ETF provider.