The decline in the market should not dissuade any investor from allocating part of their portfolio to real estate, explains Julian Hince for Financial Times.

The benefits of real estate allocation include:

• A stable and steady income stream is possible
• Real estate has a low correlation to equity and fixed-income, giving clear diversification benefits
• Low price volatility is also a plus

Real estate investment trusts (REITs) have been looked at for their liquidity and as an alternative to direct property investment. REITs are publicly traded real estate companies that own, manage and sometimes finance real estate.

A REIT ETF will typically invest in a range of vehicles, offering investors the benefits of instant diversification through one single trade. Investors only need to make one transaction and track one price, but still gain exposure to the entire index at once. This makes them lower maintenance and easy to understand. They make it possible to have small investments in real estate.

For more stories about REITs, visit our REIT category. Among the many REIT ETFs available now:

• First Trust S&P REIT (NYSEArca: FRI): up 19.3% year-to-date
• Vanguard REIT Index ETF (NYSEArca: VNQ): up 20.1% year-to-date
• SPDR Dow Jones REIT (NYSEArca: RWR): up 18.9% year-to-date

Some major assets are priced at 1999 levels, and if the current situation resembles past ones, there may be opportunities on which you can capitalize, remarks Stacy Johnson for Wise Bread.

Case in point: housing prices have been greatly reduced, and commercial properties may now provide better cash-on-cash return – not including tax write-offs that may make them extra enticing.

• iShares Dow Jones U.S. Real Estate (NYSEArca: IYR): up 19.8% year-to-date

• iShares FTSE NAREIT Industrial/Office Complex (FIO): up 17.9% year-to-date

Another example is the stock markets. After the spectacular gains since the March lows, the stock market is still lower than it was prior to January 2000.

• SPDRs S&P 500 (NYSEArca: SPY): up 20.3% year-to-date

If you are one of the lucky few that does have money but doesn’t know what to do with it, luxury items have cheapened. The opportunities found in lower prices don’t come often.

• Claymore/Robb Report Global Luxury (NYSEArca: ROB): up 50.5%year-to-date

In the sage words of Warren Buffet, “be fearful when others are greedy and greedy when others are fearful.” It is also prudent to have a plan in place before you invest. We use the 200-day moving average to choose those areas that could be about to enter a long-term uptrend. You can read more about the trend following plan in our book, The ETF Trend Following Playbook.

For more information on trend following, visit our trend following category.

Max Chen contributed to this article.

The Chicago Purchasing Managers Index, considered a precursor to the national Institute for Supply Chain Management Index, fell to 46.1 in September rather than rising to the 52 mark expected by economists.

Additionally, the Commerce Department said GDP, the broadest measure of the economy, sank at a pace of just 0.7% in the spring, beating analysts’ expectations of an annualized drop of 1.1%.  Although GDP numbers are promising, the Chicago PMI data is fresher, and reminded investors that the economy still has major obstacles to overcome before a solid recovery can occur, state Ieva M. Augstums and Tim Paradis of the Associated Press.

In the real estate arena, U.S. mortgage applications fell despite attractive loan rates.  The Mortgage Bankers Association said applications fell to a seasonally adjusted 2.8% in the week of Sept. 25, driven down by a 6.2% drop in demand for purchase loans and a 0.8% decline in refinancing requests.  The data further suggest that a rebound in the housing sector will be a slow one.  The iShares Dow Jones U.S. Real Estate (NYSEArca: IYR) was down 1.5% in morning trading.

In other news, a bit of hope loomed the air as the International Monetary Fund announced that likely losses from the global financial crisis through 2010 are going to be reduced by $600 billion to $3.4 trillion.  The IMF’s reassessment of the potential losses stemming from the financial crisis comes ahead of Thursday’s World Economic Outlook, when the fund will publish its latest estimates for the global economy, reports Carter Dougherty for The New York Times.

Overall, all three major U.S. indexes were down in morning trading with the Dow Jones Industrial Average giving up 0.9%, the S&P 500 dropping 0.9% and the Nasdaq down 0.8%.

For more stories on real estate, visit our real estate category.

Kevin Grewal contributed to this article.

The Conference Board said that its index of consumer confidence fell to 53.1 in September, down from a 54.5 in August and a far cry from the 57 expected by economists.  The decline was attributed to concerns about the labor markets. Consumer confidence is truly the catalyst behind an economic recovery, reports the Associated Press.

The housing sector continues to show signs of life as the Standard & Poor’s Case-Shiller Index, a home price index of 20 major cities, showed home prices rising 1.2% in July from June, marking the third straight month of increases.  To add to this, the index has risen at an 8% annualized rate in the three months to July, the best performance since early 2006, states the Associated Press.  Despite the upbeat news, the iShares Dow Jones U.S. Real Estate (NYSEArca: IYR) was down 1.7% in morning trading.

Crude oil continued to decline as the U.S. dollar gained ground.  Anticipation of the release of an unfriendly government report indicating large crude supplies hovers over the volatile commodity.  Crude fell to $66.51/barrel on the New York Mercantile Exchange.  The United States Oil Fund (NYSEArca: USO) was down 1.1% in morning trading.

Overall, the Dow Jones Industrial Average was down 0.4%, the S&P 500 gave up 0.4% and the Nasdaq was down 0.6% in morning trading.

For more stories on oil, visit our oil category.

Kevin Grewal contributed to this article.

Some good news for housing, as new home sales in the U.S. grew in August to the highest level in over one year. Builders cut pricing to compete with foreclosures and previously owned homes, reports Bob Willis for Bloomberg. If the worst housing slump since the Great Depression is finally turning, there are good ways to play the upward trend.

There is a so-called “big four” when it comes to domestic real estate or REIT, ETFs to pick from is you so desire the asset class for your portfolio. Don Dion for The Street says the following four are worth your consideration due to low fees, liquidity and diversification:

• iShares Dow Jones U.S. Real Estate (NYSEAcra: IYR)

The most popular ETF,with 24 million shares traded per day. Expense ratio is 0.48%, and there are $2.9 billion assets under management. IYR tracks the Dow Jones U.S. Real Estate Index, a float-adjusted, market-cap weighted index. Top 20 holdings are timber REITs.

• iShares Cohen & Steer Realty Majors (NYSEArca: ICF)

About 1 million shares per day are traded, and the expense ratio is 0.35%. Assets under management is at $1.7 billion. ICF follows the Cohen & Steers Realty Majors Index, takes into account management, portfolio quality and sector and geographic diversification. It rebalances quarterly such that no fund exceeds 8% of assets.

• Vanguard REIT (NYSEArca: VNQ)

VNQ has about 20 more holdings than most other REIT ETFs, and the sum of their allocations only came to 2.4% as of June 30. VNQ had $3.4 billion at the end of August and costs 0.15%. About 3 million shares per day are traded. This is a great buy-and-hold fund, but this ETF is not recommended for those who want up-to-date information on asset allocation. Since the fund does not re-balance quarterly as the others do, up-to-date information on holdings is not readily available. The low fees are unbeatable from a long term investor standpoint.

• SPDR Dow Jones REIT (NYSEArca: RWR)
  

RWR has $1.3 billion in assets and has an expense ratio of 0.25%. About 0.8 million shares trade per day, and  tracks the Dow Jones U.S. Select REIT Index, a float-adjusted, market cap-weighted index that rebalances quarterly. Compares the closest to IYR as far as holdings are concerned.

For more stories about real estate, visit our real estate category.

The Commerce Department reported that new home sales edged up 0.7% in August, however, this increase fell short of the 1.6% expected by economists.  This is good news, but investors were unsure how to take it due to its discrepancy from anticipated results.  The news sent the iShares US Dow Jones Real Estate Index (NYSEArca: IYR) up 0.2% in morning trading.

In other news, the Commerce Department reported a decline in orders meant to last three years or longer by 2.4%, after increasing 4.8% in July and missing analyst expectations of an increase by 0.5%.  The drop was due primarily to a sharp fall in demand for commercial aircraft, a highly volatile portion of the orders report. Even excluding aircraft and other transportation goods, orders were flat in August.

In Philadelphia, a Group of 20 world leaders are uniting behind a plan to force banks to tie compensation more closely to risk and tighten capital requirements, while they agreed to maintain stimulus measures to spur the global economy.  Additionally, they are turning their attention from crisis management to overhauling the rules governing financial markets as the group assumes the mantle as the world’s main forum for global economic cooperation, states Simon Kennedy and Gonzalo Vina of Bloomberg.

In the fixed income world, benchmark borrowing costs for highly rated state and local governments dropped to a 42-year low this week, as the pace of new municipal-bond issues slowed and cash flowing into mutual funds accelerated to a record.  The weekly Bond Buyer 11-Bond index, which tracks tax- exempt yields on 20-year general-obligation debt with an average Aa1 rating, fell 14 basis points, or 0.14 percentage point, to 3.79 %, its sixth straight decline.

Overall, the Dow Jones Industrial Average was down 0.1%, the S&P 500 dropped 0.1% and the Nasdaq gave up 0.4%.

For more stories on real estate, visit our real estate category.

Kevin Grewal contributed to this article.

A day after the Federal Reserve announced that economic activity is improving, the National Association of Realtors said that existing home sales fell 2.7% in August, compared to a gain of 7.2% in July, snapping a four-month rally.  The number of home sales fell to an annual rate of 5.10 million units as compared to expectations of 5.35 million units.  The news sent the iShares Dow Jones U.S. Real Estate (NYSEArca: IYR) down 3.5% in morning trading.

The Labor Department reported that the number of newly laid-off workers seeking unemployment benefits fell for a third week. Initial claims for unemployment insurance fell by 21,000 to 530,000, much lower than the 550,000 expected by economists and an indicator that the economy is stabilizing.

Scott Lanman of Bloomberg states that the Federal Reserve plans to reduce its emergency programs that auction loans to commercial banks and Treasury securities to bond dealers as the financial markets continue to improve.  Additionally, Fed policymakers committed to complete their $1.25 trillion in purchases of mortgage securities and extended the end-date of the program to March from December.

Black gold fell sharply in morning trading as a government report showed a larger-than-expected buildup in crude supplies.  Additionally, oil demand fell by 3% and gasoline supplies surged by more than 5 million barrels even though refineries took in 316,000 fewer barrels of crude each day.  The United States Oil Fund (NYSEArca: USO) was down 2.9% in morning trading.

All three major U.S. indexes are in the red, with the Dow Jones Industrial Average dropping 0.4%, the S&P 500 giving up 0.8% and the Nasdaq declining by 1.1%.

For more stories on oil, visit our oil category.

Kevin Grewal contributed to this article.

The Fed is expected to make its announcement this afternoon. The U.S. Central Bank will likely keep rates at zero, but investors are waiting for indications of when interest rates may rise as well as clues about the strength of the economic recovery. The announcement will be made at 2:15 ET.

In the earnings arena, foodmaker General Mills (NYSE: GIS) reported a 51% increase in profits on lower ingredient costs and strong demand for its products. The maker of Cheerios reported quarterly earnings of $1.28/share, beating Wall Street’s expectations of $1.03/share.  The company has witnessed increases in sales as more people are choosing to dine at home.  The news sent the PowerShares Dynamic Food & Beverage (NYSEArca: PBJ) up 0.1% in morning trading.

In the real estate sector, mortgage applications jumped to their highest levels since May when interest rates were below 5%, states Julie Haviv for Reuters.  The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications for the week ending Sept. 18 increased 12.8% to 668.5.  This increase was fueled by consumer desire to refinance loans as well as obtain new mortgages to purchase homes.  Despite the news, the iShares Dow Jones Real Estate (NYSEArca: IYR) was down 1.4% in morning trading.

Globally speaking, the G-20 summit is taking place in Pittsburgh were President Barack Obama is trying to convince European leaders to impose more stringent rules and regulations on bank pay limits.  Some believe this will be tough, as European countries are becoming increasingly impatient at the pace of action on climate change and financial regulation in the U.S. Congress and by the Obama administration.

Overall, the Dow Jones Industrial Average dropped 0.2%, the S&P 500 was down 0.3% and the Nasdaq gave up 0.1% in morning trading.

For more stories on real estate, visit our real estate category.

Kevin Grewal contributed to this article.

The Labor Department reported that workers filing for jobless claims for the first time dipped to 545,000 last week from a revised 557,000 from the previous week.  This was the lowest level of new claims since early July, which indicates that job cuts could be easing.  The report, however, indicated that those who continue to file for claims increased to 6.2 million, reports the Associated Press.

In the real estate arena, the Commerce Department said housing starts increased in August to their highest level in nine months amid a jump in apartment building. Housing starts rose 1.5% to an annual rate of 598,000 units last month, just below the 600,000-unit pace economists had forecast.  The news sent the iShares Dow Jones U.S. Real Estate (NYSEArca: IYR) up 1.4% in morning trading.

Manufacturing continues to outperform as the Federal Reserve Bank of Philadelphia’s general economic index measuring manufacturing in the Philadelphia area rose to 14.1 from 4.2 in August.  The measure showed the first back-to-back monthly growth since the end of 2007.

At the G-20 summit, President Barack Obama and other world leaders are expected to pledge to keep economic stimulus policies and packages in place until all are certain that an economic recovery is actually ocurring.  Additionally, leaders will try to ensure the expansion around the world, especially in emerging markets, is balanced. It’s a goal economists say will require more savings in the United States and greater domestic demand in countries such as China, states Rebecca Christie and Hans Nichols of Bloomberg.

In the earnings game, shipping giant FedEx (NYSE: FDX) said that it sees signs of a global economic improvement as international shipments increased, but also said that its bottom line will remain weak for the remainder of the year.  FedEx said fiscal 2010 first quarter earnings dropped 53% with earnings of $0.58/share.  The news sent the iShares Dow Jones Transportation Average (NYSEArca: IYT) up 0.2% in morning trading.

Overall, all three major U.S. indexes were in positive territory with the Dow Jones Industrial Average adding 0.4%, the S&P 500 jumping 0.3% and the Nasdaq gaining 0.2%.

For more stories on transportation, visit our transportation category.

Kevin Grewal contributed to this article.

Since the market lows on March 9, financials have rebounded handsomely, up as much as 140% since then. Most of them are perched firmly above their 200-day moving averages, as well.

There are a variety of ETFs that cover the sector. Because of the sector’s high profile, it is essential to know exactly what is under the hood of these ETFs.  The sector can be  subdivided into the following: broad-based, regional banks, capital markets, insurance and REITs.  John Gabriel of Morningstar breaks down the sector and provides an in-depth analysis of industries that constitute the financial sector.

The most widely held and common financial ETFs are broad-based financials, which include the SPDR Select Sector Financial (NYSEArca: XLF) and the Vanguard Financials (NYSEArca: VFH). Banks constitute nearly half of the asset base of XLF and 42% of VFH, insurance companies account for nearly 18% of XLF and 22.5% of VFH and capital markets soak up about 19% of both XLF and VFH.

In regard to the banking sector, some common ETFs investors look at are the SPDR KBW Bank (NYSEArca: KBE) and the PowerShares Dynamic Banking (NYSEArca: PJB). KRE is heavily exposed to banks operating in the Pacific region, nearly 25% of its assets, whereas PJB holds about 6% of its assets in this region.  Additionally, KRE is the only regional bank ETF which doesn’t hold stakes in large money center banks, whereas 10% of PJB’s assets are allocated to this specialty.

As for capital markets, investors can grab exposure to exchanges alongside brokers, money managers, and former investment banks through the SPDR KBW Capital Markets (NYSEArca: KCE) and the iShares Dow Jones US Broker-Dealers (NYSEArca: IAI). Both funds are nearly identical, except that KCE includes a sampling of traditional asset managers in its mix.

When it comes to insurance, investors can grab exposure through the PowerShares Dynamic Insurance (NYSEArca: PIC), SPDR KBW Insurance (NYSEArca: KIE) and the iShares Dow Jones U.S. Insurance (NYSEArca: IAK). The major difference between these ETFs mainly lies in their exposure to life insurers.  PIC has 3% of its assets to the subindustry, whereas KIE and IAK have 22% and 23% allocated to life insurers, respectively.

As for real estate investment trusts (REITs), the most common ETFs include the iShares Dow Jones U.S. Real Estate (NYSEArca: IYR) and the Vanguard REIT Index (NYSEArca: VNQ). A big difference between these two ETFs is that IYR contains mortgage REITs and unconventional holdings such as timber REITs and real estate services firms while VNQ limits itself to primarily conventional REITs.

In addition to knowing what an ETF holds, we suggest one watch the trendlines and have a strategy as this sector continues its recovery, as well.

For more stories on financials, visit our financial category.

Kevin Grewal contributed to this article.