Real Estate ETFs, the S&P 500, and the Great Cosmic Joke

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Let’s get one thing straight: money doesn’t care about you. It moves where it wants to move, like a stray cat in an alleyway, and sometimes it just disappears entirely. So if you had plunked down $1,000 on the Vanguard Real Estate ETF (VNQ) a decade ago, here’s what you’d have today: about $1,770. Assuming you reinvested your dividends, of course. And assuming the universe didn’t decide to swallow them whole.

Not bad, right? You didn’t lose money, which is more than I can say for most people who try their luck at love or happiness. But let’s not kid ourselves-this isn’t exactly a ticker-tape parade of success. If you’d put that same $1,000 into an S&P 500 index fund like the Vanguard S&P 500 ETF (VOO), you’d be sitting pretty with $3,900. Life is unfair, isn’t it? So it goes.

What happened?

The short answer is this: real estate got its lunch eaten by the stock market. The S&P 500 has been on a bull run so absurd, it makes ancient Greek gods look modest by comparison. Over the past ten years, it’s delivered annualized returns of roughly 14.6%. That kind of performance is hard to beat unless you’re secretly Zeus himself.

But there’s more to it than that. Real estate, as anyone who’s ever paid rent knows, is sensitive. Not emotionally sensitive-though landlords might argue otherwise-but interest-rate sensitive. In the last decade, we’ve seen two long stretches of Federal Reserve rate hikes, with a global pandemic sandwiched in between like some sort of tragic bologna sandwich. Today, the federal funds rate sits over 400 basis points higher than it did back then. Imagine carrying that much extra weight around. No wonder real estate struggled.

Real Estate Investment Trusts, or REITs, are particularly vulnerable to rising rates. Why? Well, they borrow money like college students take out loans-with abandon and little regard for consequences. When rates go up, borrowing costs climb, and suddenly growing becomes harder than explaining quantum physics to a toddler. It’s almost poetic, really.

And then there’s the matter of property values. Commercial real estate prices tend to slump when interest rates rise, because investors start looking at Treasury bonds instead. Those boring old Treasuries offer steady returns without all the headaches of leaky roofs and tenant complaints. Who wouldn’t prefer that?

Of course, none of this means real estate is doomed forever. Far from it. When rates fall again-and they always do, eventually-REITs could roar back like a tiger waking from a nap. Falling rates make borrowing cheaper, property values rise, and everything feels sunny again. Until it doesn’t. So it goes.

Here’s the truth, though: whether you’re talking about real estate, stocks, or even life itself, nothing is guaranteed. Markets zig while we zag. Economies boom and bust like lovers changing moods. All we can do is watch, invest wisely, and hope for the best. Or maybe just laugh at the absurdity of it all. After all, the stars don’t care about our spreadsheets any more than they care about our dreams. 🌟

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2025-08-26 14:09