FREL vs. FSRNX: Are They the Fidelity’s Equivalent of VNQ?

Someone asks:

I am planning to diversify my portfolio to REIT. For those who invest in real estate stocks, what are your thoughts on the Fidelity Real Estate Index Fund (FSRNX)?

I looked into FREL and it seems like a good REIT fund to start with. Any other recommendations?

Key points between FREL and FSRNX

  • FREL is a real estate index ETF while FSRNX is a real estate mutual fund.
  • FSRNX has a lower expense ratio.
  • Both funds require $0 minimum to invest.

FREL vs VNQ: Fund Objective

FREL is a Fidelity real estate ETF that invests in the largest and most liquid U.S. traded stocks of companies engaged in the ownership, management, and development of commercial and residential properties.

The Fidelity MSCI Real Estate Index ETF was launched on February 5, 2015, by Fidelity Investments as a passively managed index fund.

Vanguard Real Estate Index Fund ETF Shares, or VNQ for short, is an exchange-traded fund that invests in real estate investment trusts. The fund closely tracks the MSCI US Investable Market Real Estate 25/50 Index.

FREL vs VNQ: Expense Ratio

The expense ratio is a fee paid to the fund manager annually for managing the fund’s assets.

FREL charges an expense fee of 0.08%, while VNQ charges 0.12% per year.

FREL vs VNQ: Top 10 Holdings

Both funds have some overlapping stocks but with different weights.

VNQ Top 10 Holdings

COMPANY SYMBOL TOTAL NET ASSETS
Vanguard Real Estate II Index Fund Institutional Plus Shares VRTPX 11.35%
American Tower REIT AMT 6.87%
Prologis Inc. PLD 6.43%
Crown Castle International Corp. CCI 4.60%
Equinix Inc. EQIX 3.90%
Public Storage PSA 3.05%
Simon Property Group Inc. SPG 2.64%
Digital Realty Trust Inc. DLR 2.53%
SBA Communications Corp. SBAC 2.20%
Realty Income Corp. O 2.04%

FREL Top 10 Holdings

COMPANY SYMBOL TOTAL NET ASSETS
American Tower REIT AMT 7.70%
Prologis Inc. PLD 7.21%
Crown Castle International Corp. CCI 5.21%
Equinix Inc. EQIX 4.39%
Public Storage PSA 3.41%
Simon Property Group Inc. SPG 3.05%
Digital Realty Trust Inc. DLR 2.89%
SBA Communications Corp. SBAC 2.46%
Realty Income Corp. O 2.31%
CBRE Group Inc. Cl A CBRE 2.11%

As of 12/31/2021

FREL vs VNQ: Dividend Yield

The Fidelity MSCI Real Estate Index ETF (FREL) pays quarterly dividends. The dividend yield is 2.34%.

The current adjusted effective yield for VNQ is 1.60%. The Vanguard real estate ETF also pays dividends on a quarterly basis.

FREL vs VNQ: Annual Return

Let’s see how both funds have performed over the past five years.

Funds Fidelity® MSCI Real Estate Index ETF Vanguard Real Estate Index Fund ETF Shares
1 month +9.73% +9.70%
3 months +14.81% +14.89%
6 months +15.56% +15.67%
1 year +40.50% +40.38%
3 years +19.85% +19.91%
5 years +12.36% +11.22%

Conclusion: Which is Better? FREL, VNQ, or FSRNX?

First of all, it’s important to clarify that FSRNX is a mutual fund while FREL and VNQ are ETFs. Exchange traded funds are more favorable in a taxable brokerage account because of their tax efficiency.

FSRNX has the lowest expense ratio (0.07%). However, the fund performance has been lacking.


Community Reviews:

Jason B:

I was in FREL when Fidelity’s mutual funds had minimum investments. I switched to FSRNX when they announced no minimums.

Mufi T:

If you are open to funds consider FREL. O is one of its top holdings, along with other companies like American Tower, Weyerhaeuser, Crown Castle. Very strongly rated fund too.

Honuman C:

I have Fidelity’s FREL; Vanguard’s VNQ and Vanguard’s International VNQI. American Towers and Crown Castle are surging now due to their connection with 5G. MPW is a Reit for medical facilities.

Mike D:

FSRNX, has returned 18.51 % in my account since 7/20. STAG, has also been mentioned as a good investment currently.

Andrew G:

You might want to consider FSRNX. Perhaps with the return of office work REITs might improve. I prefer the total market than sectors on principle. But, if this sector is undervalued then buying could be good.

John M:

I use to have VNQ, switched to FREL. has been performing slightly better and cheaper expense V 0.12 Frel 0.08. I also own O and LTC as individuals. O is nice in that it gives monthly dividends.

Thomas P:

I understand the diversification aspect to REITs but it seems like they are severely lagging behind other ETF categories, and that any money put in them could be better invested elsewhere.

Sherry M:

I also have FREL in my Fidelity Roth IRA. Its been a loser since I placed it in there, but I’m banking on it coming back after the new year in a big way. I’m confident enough that I continuously purchasing new shares.

Bay B:

I’ve been holding REITs fund for almost 4 years, hoping it will go up big, but after analyzing last 5 years of performance, the rate of returned is less then 6%. I tried to diversify my portfolio by holding it that long but got rid all of it. Now it’s all about consumption and technology stock that will gives the most returns. My overall return for last years is almost 18%. Not bad for a long term strategy, I think.

Robert A:

I’m thinking about VNIQ. P/e under 11, 7.75% distribution yield. Heavy Asia concentration and the currency exposure is a good exposure to have with declining dollar.

In this market, I like cell tower REITs like AMT and land lease REITs like SAFE. Warehouses are good, but may be getting over bought; they were talking them up on CNBC today, which usually means the ship has already sailed. I think malls and commercial might be toxic; Covid will end, but there will be enduring behavioral changes. The A class malls might be OK, but considerable risk.