ETF REIT and ADR explained

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ETF REIT and ADR explained7 months ago - Chartmill

What's the difference between ETF's, REIT's and ADR's?

When setting the basic selection filters under the general menu, you can use the drop down menu 'Type' to choose from several options, being:

  • Common Stock Only
  • ETF only
  • ADR only
  • REIT only
  • Common Stock +ADR +ETF +REIT (All)
  • Common Stock +ADR +ETF (excluding REIT)
  • Common Stock +ETF (excluding ADR +REIT)
  • Common Stock +ADR +REIT (excluding ETF)

In this article we will explain briefly what these different terms mean exactly. They allow you to tailor the selection even better to your specific needs, which can only benefit the quality of the results!

ETF’s (Exchange Traded Funds):

Just like common stocks, these ETFs are publicly traded and thus tradable throughout the whole trading day. An ETF is a passive managed investment fund whose sole purpose is to track a specific index as accurately as possible. These can be stock market indices or specific sectors but there are also commodity or real estate ETFs, for example. Due to their passive nature, low cost design and the fact that such a tracker is invested in all the stocks that are part of the specific index being tracked, this is a very simple way to be invested quickly, inexpensively and well-diversified. "The WisdomTree Cybersecurity ETF (NASDAQ: WCBR)" for example is designed to track the performance of companies primarily involved in providing cyber security-oriented products.

ADR’s (American Depository Receipts):

These are shares of non-US companies that are issued by a US bank and therefore traded on the US stock market. The US bank holds the shares in the foreign company as a pledge and then offers the so-called ADRs, while the investor in these ADRs does have equal rights (for example, just as with ordinary shares on the primary market, dividends are paid if applicable). A major advantage is that foreign shares do not have to go through the admission procedure to be listed on the regulated US exchanges. Moreover, the US market is still much more liquid than the European market and therefore more attractive to raise capital. For investors in ADRs, this means that they can still trade these non-US companies on the US exchanges. An important difference is the listing in US dollars.

REIT’s (Real Estate Investment Trust):

REITs allow the investor to invest indirectly in real estate that the company owns and from which the company derives its income. The difference from regular real estate companies is that a REIT does not produce real estate with the intention of reselling it. The income comes entirely from the rent that is paid. A portion of that income is then distributed to investors, in the form of a dividend. The type of real estate leased is highly diversified and ranges from office complexes, shopping centers, hotels, retirement homes but also warehouses or data centers for example. The income stream from REIT investments is considered fairly stable due to the rents which - under normal market conditions - are also quite predictable and stable.

The ChartMill Team


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