# Zre vs. Xre



## JA2285 (Jan 25, 2011)

Why would someone choose one over the other?

ZRE appears to have a higher yield and have split their top 10 holdings up a bit more over XRE. Both have the same MER..

Any insight here?


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## PMREdmonton (Apr 6, 2009)

JA2285 said:


> Why would someone choose one over the other?
> 
> ZRE appears to have a higher yield and have split their top 10 holdings up a bit more over XRE. Both have the same MER..
> 
> Any insight here?


In principle, ZRE could have higher diversification and better returns but more volatility because they are equal weight whereas XRE is cap weighted.

Because XRE is cap weighted, the top 3 holdings make up more than 50% of the portfolio. Some have said that you may be better off in the long run just buying the top 3 holdings and avoiding the MER but that does involve more work, more trades and higher commissions. 

In the end, either is fine but just slightly different as I outlined above.


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## ChrisR (Jul 13, 2009)

Because of the equal weighting, ZRE gives relatively greater exposure to the smaller REITs, and avoids the biggest problem with XRE, that 3 stocks make up greater than 50% of the holdings.

On the other hand, ZRE also has some potential risks: 

The equal weighting means that this ETF is likely to have a higher portfolio turnover than a cap-weighted ETF like XRE. This could trigger capital gains taxes. 
ZRE is still a very small ETF. If it turns out to not be profitable it could be discontinued, which would trigger further capital gains taxes.

I personally hold both these ETFs in roughly equal amounts. ZRE in my TFSA, where it is protected from capital gains taxes that could be triggered if the ETF were liquidated, and XRE in my non-registered account.


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## Financial Cents (Jul 22, 2010)

PMREdmonton said:


> In principle, ZRE could have higher diversification and better returns but more volatility because they are equal weight whereas XRE is cap weighted.
> 
> Because XRE is cap weighted, the top 3 holdings make up more than 50% of the portfolio. Some have said that you may be better off in the long run just buying the top 3 holdings and avoiding the MER but that does involve more work, more trades and higher commissions.
> 
> In the end, either is fine but just slightly different as I outlined above.


Well said. I own the top 2 holdings of XRE directly. 

I am tempted to buy XRE for wife's TFSA next year until I get enough invested in her TFSA to buy and DRIP BEI.UN and REF.UN.


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