Nevertheless, some investors fear REITs will act negatively in rising interest rate environment. The high dividends in REITs are attractive in a low-rate environment but are less enticing once safer Treasuries show higher rates. [Don’t Overload REIT ETF Allocations]
Some investment experts argue that since commercial property has a larger presence in the U.S. economy than REITs do in the equities market, investors could benefit from a 5% to 10% allocation to REITs to bring their investments more in line with commercial property’s significance in the overall economy. [REIT ETFs Still Have a Place in an Investment Portfolio]
“Modern portfolio theory (MPT) seeks to construct optimized portfolios by measuring the diversification of the assets in the portfolio. The fund has a low beta of 0.33 versus the larger stock market. The fund also has a low R-squared of 0.04 with the stock market. This indicates that the fund’s returns are statistically not related to the movement of the stock market. Further, rather than having to invest directly in real estate, investors can easily buy and sell shares of the ETF. This makes diversification easy and cost effective,” adds Investopedia.
Vanguard REIT ETF
