Schwab US REIT ETF

SCHH

Market cap $8.97B

The REIT sector closed out 2025 with a tough December (-1.48%) and finishing the year with a -3.57% total return for 2025. Small caps (+0.51%) eked out a small gain in December, while mid caps (-1.77%), large caps (-2.55%) and micro caps (-3.88%) fell at the close of the year. 42.04% of REIT securities had a positive total return in December with only 38.36% in the black for the full year.

RWR charges a higher expense ratio but delivers a higher dividend yield than SCHH. Both funds are pure-play U.S. REIT portfolios with similar top holdings, but RWR holds fewer securities.

Everything says REITs should be soaring — but they aren't. A hidden headwind is quietly holding returns back. One overlooked niche is where I am pouring my REIT capital.

VNQ charges a higher expense ratio but pays a higher dividend yield than SCHH VNQ is much larger in assets, and both funds have similar sector exposures and top holdings Both ETFs saw similar negative 1-year returns and experienced steep five-year drawdowns These 10 Stocks Could Mint the Next Wave of Millionaires ›

SCHH charges a much lower expense ratio but offers a smaller dividend yield compared to RWR. RWR edges out SCHH on five-year total returns and has a slightly shallower historical drawdown.

The Schwab U.S. REIT ETF ( NYSEARCA:SCHH ) has spent the last year treading water, down roughly 2% while investors waited for interest rates to cooperate.

REITs, as represented by VNQ, now trade at a median implied cap rate of 7.7%, offering a compelling spread over Treasuries. Recent REIT underperformance stems from valuation overshoots, not weak real estate fundamentals; current pricing reflects an attractive entry point. Industrial and shopping center REITs are materially mispriced, combining strong NOI growth with moderate-to-high cap rates, while self-storage remains overvalued and risky.

The REIT sector returned to positive territory in November (+1.02%) after back-to-back months in the red. Mid caps (+3.53%) led the REIT sector in November followed by small caps (+3.38%) and large caps (+0.32%); micro caps (-8.76%) badly underperformed. 68.15% of REIT securities had a positive total return in November.

The Schwab U.S. REIT ETF offers liquid, low-cost exposure to U.S. commercial real estate via equity REITs, not mortgage REITs. I recommend a tactical allocation of 3-4% to SCHH, as the risk-return profile is improving with the anticipated easing of real interest rates. SCHH is institutionally scaled, highly liquid, and diversified, with 49% of assets concentrated in its top 10 holdings, notably Welltower Inc.

Year-to-date returns across the REIT market varied remarkably, with large gains from non-U.S. REITs and U.S. healthcare REITs, while U.S. residential and data center sectors were notable laggards. In the last three years, there have been two major forces impacting the performance of equity markets and real estate. Today's public REIT market looks a lot different than what most investors expect. Sectors previously considered niche have grown to be essential in today's economy and society.