Moreover, while inflation may be low now, REITs are seen as a hedge against potentially rising inflation ahead. REITs with shorter lease durations will fare better in a rising-rate environment since they are able to more frequently negotiate higher rents from tenants.
VNQ “has been trading within an extremely strong uptrend since late 2011. Notice how the price bounced higher on each occasion that it traded near the support of the trendline (shown by the blue arrows). Based on technical analysis, the recent move toward the trendline could be presenting strategic investors with an ideal buying opportunity. Specifically, investors would expect the pattern of a bounce higher to occur again and will likely hold a bullish outlook on the fund until it closes below the major support levels,” according to Investopedia.
Additionally, REITs provide diversification benefits as the asset shows a lower correlation to stocks and bonds. Over the past three decades, REITs’ rolling 36-month correlation to other stocks ranged from 0.89 to negative 0.16 – a value of 1 translates to perfect lock step while a negative value means the two assets moved in opposite directions. The correlation between REITs and Treasuries was 0.74 to negative 0.66 over the same period.
Vanguard REIT ETF