Real estate investment trusts (REITs) have been a strong play this year, which investors can get with additional global exposure using the FlexShares Global Quality Real Estate Index Fund (GQRE).
“Real estate investment trusts (REITs) have been stellar performers so far in 2021,” a Kiplinger article said. “The real estate sector’s roughly 30% total return (price plus dividends) through the end of August easily beats the 21%-plus return for the S&P 500 Index.”
“Better still: Several factors suggest that REITs are likely to continue beating other investments in the remaining months of 2021,” the article added.
In the current low-rate environment, investors are starved for yield. This is where REITs can shine with their income potential.
“At present, both the 10-year Treasury note and the S&P 500 yield a paltry 1.3%,” the article said. “But REITs yield more than double that, at 2.7% on average, making real estate stocks one of the market’s top income-generating sectors.”
Additionally, when inflation rears its ugly head and erodes income from assets like bonds, REITs can serve as a proper hedge given their ability to move with inflation.
“Another trend favoring REITs is higher inflation. Real estate stocks offer a natural hedge against inflation due to their ability to raise rents,” the Kiplinger article said. “Data from the National Association of REITs shows that this asset class outperforms the S&P 500 Index 80% of the time during periods of high and rising inflation.”
REITs Offer Growth, Diversification, and Income
Per the fund description, GQRE seeks investment results that generally correspond to the price and yield performance, before fees and expenses, of the Northern Trust Global Quality Real Estate Index. The index is designed to reflect the performance of a selection of companies that, in aggregate, possess greater exposure to quality, value, and momentum factors relative to the Northern Trust Global Real Estate Index.
While most of its holdings reside in the U.S., investors get that global twist with holdings from other countries. That list includes Japan, Australia, Hong Kong, and Germany.
“Investing in the real estate sector offers the potential to add growth, diversification, income along with potential protection against the risk of long-term inflation to a portfolio,” the FlexShares Fund Focus article said. “We believe that a well-diversified and global approach to real estate investing is a key factor in unlocking the full range of these potential benefits.”
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