Real Estate ETFs: A Smart Way to Diversify Portfolios

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By Marie Dzanis

It’s no surprise that commercial real estate was one of the major casualties of the recent economic recession. But, then, neither is their comeback in a recovery that has offered low interest rates and depressed real estate prices. In fact, real estate is so widely acknowledged as a distinct and important asset type that it will receive its own sector classification this year, separating it from the financial services sector. And equity REIT ETFs that offer baskets of various-sized REITs may present a liquid and low-cost way to invest in this newest 11th asset sector.

First of all, for those not familiar with this investment vehicle, REIT is the acronym for Real Estate Investment Trust, a real estate company that holds real assets (actual properties) and offers common shares to the public, similar to other stocks.

REITs are unique, however, in that their sole business is the development and/or management of income-producing properties, and they are bound by regulation to distribute 90% of their taxable profits as dividends, thereby avoiding corporate income tax.

Related: 44 Best REITs ETFs to Generate Yields