Fundrise Starter Portfolio eREIT vs. Vanguard REIT ETF Review – Updated April 2018

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Updated April 2018. This post tracks my experiment comparing a Fundrise eREIT portfolio and the Vanguard REIT ETF. In Fundrise, we have a start-up that bought a concentrated basket of roughly 20 properties chosen from the private market. In Vanguard, we have a one of the largest real estate ETFs in the world that owns a passive slice of 184 public-traded REITs. I invested $1,000 into both in October 2017 and hope to let them run for 5 years.

Fundrise Starter Portfolio background. Despite the name, the Fundrise Starter Portfolio is actually a simple 50/50 mix of their first two eREITs: the Fundrise Income eREIT and the Fundrise Growth eREIT. Learn about other Fundrise portfolios here. This private eREIT utilizes recent crowdfunding legislation that allows all investors to own a basket of individual real estate properties (not just accredited investors with high net worth). The minimum deposit is $500. You must buy shares directly from Fundrise, and there are liquidity restrictions as this is meant to be a long-term investment. Here’s a recent map of locations for the holdings. Most are apartment complexes, condominiums, and hotels.

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Vanguard REIT ETF background. The Vanguard REIT ETF (VNQ) is one of the largest index funds to invest in publicly-traded real estate investment trusts (REITs). You can purchase it via any brokerage account. You have the liquidity of being to sell on any day the stock market is open. A single share currently costs about $76, not including an trade commission. You are holding a tiny slice of (tens of?) thousands of office buildings, hotels, nursing homes, shopping centers, apartment complexes, and so on. Here are the recent top 10 holdings:

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Expenses. The Fundrise Starter Portfolio waived their advisory fees until 12/31/17 and is now 0.15% annually. Each underlying eREIT will also have their own internal fees and costs for managing the properties. The Vanguard REIT ETF has an expense ratio of 0.12%, with each public REIT having their own internal costs to manage their properties. Due to scale, I would expect the net effect of fees to be significantly higher for the Fundrise assets than for the Vanguard ETF. We will see if Fundrise can provide higher net returns for this concentrated holding.

Five-year time horizon. Both Fundrise and VNQ usually announce dividend distributions on a quarterly basis. Vanguard updates the NAV daily, but Fundrise only updates their NAV quarterly. Fundrise NAVs are only estimates as there is no daily market value available (similar to your house). Therefore, I plan on holding onto this investment for 5 years at the minimum. This will allow the investments to “play out” and also avoid any early redemption fees. I will withhold final judgement until both investments are cashed out, but will provide quarterly updates.

Fundrise Portfolio performance update. Screenshot of my most recent statement:

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  • 10/20/17: $1,000 initial investment – 50 shares @ $10.00/share Income eREIT and 48.780488 shares @ $10.25/share Growth eREIT.
  • 1/9/18: 2017 Q4 dividends of $17.98 total distributed.
  • 3/31/18: Statement includes NAV values of $9.81/share for Income eREIT and $10.71/share for Growth eREIT.
  • 4/11/18: 2018 Q1 dividends of $16.13 total distributed
  • Total Fundrise value as of 4/11/18 is $1,049.44 (includes reinvested dividends).

Vanguard REIT ETF performance update. I own VNQ and the mutual fund equivalent VGSLX (same underlying holdings) in my retirement portfolio, but will be using Morningstar tools to track the performance of a $1,000 investment bought on the same date of 10/20/17.

  • 10/20/17: $1,000 initial investment – 11.9545 shares at $83.65/share.
  • 12/27/17, VNQ distributed a gain of $0.012 per share, return of capital of $0.37 per share, and a dividend of $0.88 per share.
  • 3/29/18, VNQ distributed a dividend of $0.71 per share.
  • Total VNQ value as of 4/11/18 is $915.52 (includes reinvested dividends).

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The net asset value of the major US REIT indexes has dropped in 2018 YTD. Again, I wouldn’t put too much stock into the short-term movements as the accuracy of the Fundrise NAV is inherently limited, but this is the best information that I have available. Once a year has passed, I can also include a trailing 12-month yield.

You can learn more about all Fundrise eREIT options here. I have written about my past experiences in my Fundrise eREIT review and Fundrise Liquidity and Redemption review.

Firstrade Commission-Free ETF Program Review – Includes Vanguard, iShares Core, Schwab Index ETFs

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Online brokerage Firstrade just announced a new Commisssion-Free ETF program that includes 700+ ETFs from 40 fund families. This is a bold move as it includes both a lot of ETFs (quantity) but also the best ETFs (quality) from providers like Vanguard, iShares, WisdomTree, SPDR State Trust, and Schwab.

Firstrade already cut their standard trade commission to $2.95 per trade in 2017. The program is designed for long-term investors and the ETFs must be held for at least 30 days (if less than 30 days, the commission is the standard $2.95). Leveraged ETFs are not included. There is no need for any special enrollment for this ETF program.

Low-cost, broadly-diversified ETFS across major asset classes. Here is a partial list of ETFs that I noticed:

Vanguard (52 ETFs total)

  • Vanguard S&P 500 ETF (VOO)
  • Vanguard Total International Stock ETF (VXUS)
  • Vanguard Dividend Appreciation ETF (VIG)
  • Vanguard Small-Cap Value ETF (VBR)
  • Vanguard FTSE Developed Markets ETF (VEA)
  • Vanguard FTSE All-Wld ex-US ETF (VEU)
  • Vanguard Global ex-US Real Est ETF (VNQI)
  • Vanguard FTSE Emerging Markets ETF (VWO)
  • Vanguard Short-Term Infl-Prot Secs ETF (VTIP)
  • Vanguard Total International Bond ETF (BNDX)

Notably absent: Vanguard Total Stock Market ETF (VTI)

iShares (173 ETFs total)

  • iShares Core S&P Total US Stock Mkt ETF (ITOT)
  • iShares Core S&P 500 ETF (IVV)
  • iShares Core MSCI Total Intl Stk ETF (IXUS)
  • iShares Core US REIT ETF (USRT)
  • iShares Core MSCI EAFE ETF (IEFA)
  • iShares Core MSCI Emerging Markets ETF (IEMG)
  • iShares Core Dividend Growth ETF (DGRO)
  • iShares Core US Aggregate Bond ETF (AGG)
  • iShares Core International Aggt Bd ETF (IAGG)
  • iShares Short Maturity Bond ETF (NEAR)

Schwab (20 ETFs total)

  • Schwab US Broad Market ETF (SCHB)
  • Schwab US Dividend Equity ETF (SCHD)
  • Schwab Emerging Markets Equity ETF (SCHE)
  • Schwab International Equity ETF (SCHF)
  • Schwab US REIT ETF (SCHH)
  • Schwab US TIPS ETF (SCHP)
  • Schwab US Aggregate Bond ETF (SCHZ)

With this move, they take the title of “Largest Commission-Free ETF Program” from TD Ameritrade. Here’s their comparison chart.

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My take. Overall, competition is good and I always like to see lower prices for long-term ETF investors. Additional considerations:

  • Sustainable? This list is very similar to what TD Ameritrade used to offer commission-free, at least in terms of offering the most popular ETFs. However, TD Ameritrade eventually went for quantity over quality, dropping most of their widely-held ETFs and replacing them with niche ETFs and index ETFs from SPDR. One can only assume this is a loss-leader offering for Firstrade. Will it last?
  • Truly simple portfolios can just stick to the source. If you really want to construct a simple portfolio, you can open an account at Vanguard, Fidelity (iShares), and Schwab and buy ETFs (limited to their family) with no commission. The benefit is that in-house discounts are much more likely to stay free.
  • Tax-loss harvesting. A potential benefit of using a brokerage account is if you do tax-loss harvesting with ETFs. For example, you could sell iShares Core S&P Total US Stock Mkt ETF (ITOT) and buy Schwab US Broad Market ETF (SCHB), all commission-free and in the same account. With the big list above, ETF pairing for almost every asset class are available.

Bottom line. Firstrade has a new Commisssion-Free ETF program that tries to offer both quantity (700+ ETFs from 40 fund families) and quality (top-rated and popular ETFs from Vanguard, iShares, and others). This sure looks nice, but how will they make money? We recently saw TD Ameritrade cut back on their Commisssion-Free ETF program, but hopefully Firstrade can sustain this one.

Southwest Companion Pass: Business Card 60k Bonus + Personal Plus 50k Bonus

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Southwest Airlines offers a unique feature called the Companion Pass, which lets you pick one person to fly with free when you book your own paid and/or award flights. If you either fly 100 qualifying one-way flights or earn 110,000 Qualifying … [Read the rest]

Delta Airlines Hack: Free Credit Monitoring From All Three Bureaus for 2 Years

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In early April 2018, Delta disclosed that hackers may have compromised credit card information from ticket buyers on Delta.com between September 26 and ending October 12, 2017. However, as with many of these "cyber incidents", this may just be the … [Read the rest]

Barclays Arrival® Premier World Elite Mastercard Review: Cash Back Towards Travel Analysis

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Barclays has rolled out the Barclays Arrival® Premier World Elite Mastercard, a new hybrid travel/cashback rewards card with miles that can be redeemed for both cash or transferred to select mileage partners. The "miles" are now more flexible, … [Read the rest]

Savings I Bonds May 2018 Interest Rate: 2.22% Inflation Rate, Possible Fixed Rate Increase?

Savings I Bonds are a unique, low-risk investment backed by the US Treasury that pay out a variable interest rate linked to inflation. You could own them as a replacement for cash reserves (they are liquid after 12 months) or bonds in your … [Read the rest]

My Money Blog Portfolio Asset Allocation, March 2018

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Here is a First Quarter 2018 update for my primary investment portfolio. These are my real-world holdings, not a recommendation. It includes tax-deferred 401k/403b/IRAs and taxable brokerage accounts and excludes our primary home, cash reserves, … [Read the rest]

SaverLife Review: Starting Saving $20 a Month, Get Another $10 a Month Boost

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The importance of an emergency fund is often mentioned, but often the hardest thing is to get started. SaverLife.org is a program run by the nonprofit EARN to help working families by encouraging savings. Their idea here, essentially, is to … [Read the rest]

50 State Infographic: How Much Income Do You Need to Afford the Average Home?

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HowMuch.net compiled an infographic about the income you need to afford the average home in every US state. The key is that "afford" means that the total cost of housing take up no more than 30% of gross income. The highest income required is in … [Read the rest]

E-File Federal and State Tax Extension Online For Free (Updated 2018)

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Updated for 2018. This year, the deadline for federal tax filing is Tuesday, April 17th, 2018. If you file for an extension, you can extend the time allowed to file your return by six months to Monday, October 15, 2018. (It does not extend the time … [Read the rest]

Blooom Review: Flat Fee Financial Advice (CFP) + Free 401k Analysis

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The numbers tell us that you probably have a 401k and you're probably managing it yourself. Blooom (yes, with three Os) is a new company that focuses on providing advice for 401k, 403b, 457, and TSP accounts with modest balances, charging a flat … [Read the rest]

Graphic: The Fall of Pensions, The “Rise” of 401ks and IRAs

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Above is a historical chart of US household retirement assets that helps visualize the shift from mostly pensions to mostly a combination of defined contribution plans (401k, 403b, etc) and IRAs. Pension share has gone from nearly 80% of total … [Read the rest]