5 Reasons Not to Run From REITs During Rising Interest Rates

By Salvatore Bruno via Iris.xyz

If you’ve been investing in Real Estate Investment Trusts (REIT) to seek competitive yields and income in the historically long 0% interest rate environment, you’ve probably been thrilled with the returns in this sector over the past 12 months. But while real estate investment trusts handily outperformed the S&P 500 index in 2016, times are changing fast.

In the wake of a growing economy, many advisors are wondering where to turn to maintain yield as rates continue to rise. The yield on 10-year Treasury securities is up from 1.37% last July to over 2.50% as of March 17th, which makes fixed-income a challenging play. And with equity prices reaching all-time highs, they present a similar challenge.

And while REITs may be the last place you may turn to seek yield in a rising rate environment, if suitable, they just may be the answer you’ve been looking for. How can that be? While REITs are often seen as interest-rate sensitive, rates don’t tell the whole story. Not by a long shot.

Here are five reasons why we believe simply shifting your strategy, but not running from REITs, may provide desired yield—even in the face of yet another rate hike:

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