Potential investors should not mistake REITs as an alternative to traditional fixed-income assets like Treasuries. The REITs asset class has been 41% more volatile than the S&P 500 over the past three years and 5.5 times more volatile than the U.S. bond market.
“Potential near-term risks include slower-than-projected growth, setbacks in the U.S. economy, and rising interest rates,” Goldsborough added.
Rising rates raise REITs’ debt financing costs. However, a flat interest rate outlook would benefit REITs in an expanding economic environment as rising rents and property prices would support the asset class. [REIT ETFs for Income Generation and Diversification]
Vanguard REIT ETF
For more information on real estate investment trusts, visit our REITs category.
Max Chen contributed to this article.