Real estate investments and REIT exchange traded funds (ETFs) can be a good addition to any portfolio for a variety of reasons, not least of which is that they deliver diversification and high exposure at a lower cost.
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
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.