Good news: You don’t have to actually go out and buy real estate to have real estate exposure. Exchange traded funds (ETFs) that hold real estate investment trusts (REITs) are just one of the easier ways to get your fix.
REITs invest their capital in real estate, and you can invest your money in the REIT by a buying stock or an ETF. REITs are required to return at least 90% of their operating profit to shareholders or pay dividends. [Other Benefits of Owning REIT ETFs.]
David Moquin for Llenrock Blog reports that the major downside to investing in a REIT, however, also involves the dividend. That’s because the REIT has 10% of its profit to reinvest, which makes for slower growth. REITs are also touchy about interest rates, and prices have an inverse relationship to them.
Two of the best things about REITs is that you are not physically invested in real estate and you are invested in many companies rather than just one. And in this shaky and uncertain market climate, ETFs can be one of the easiest ways to get this diversification. [Is Commercial Real Estate at the Bottom?]
For more stories about REITs, visit our REITs category.
- First Trust S&P REIT (NYSEArca: FRI)
- Vanguard REIT Index ETF (NYSEArca: VNQ)
- SPDR Dow Jones REIT (NYSEArca: RWR)
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.