Newspaper article The Christian Science Monitor

For Mutual Funds, Return on Real Estate Beats That of Stocks Investment in REITs Seen as a Defensive Move

Newspaper article The Christian Science Monitor

For Mutual Funds, Return on Real Estate Beats That of Stocks Investment in REITs Seen as a Defensive Move

Article excerpt

If the high prices on stock exchanges make you uneasy, there's an option that has done well for investors this year and can be a good defensive play as well: real estate.

Real estate investment trusts (REITs) and mutual funds that buy them have been among this year's notable investment success stories.

REITs, traded on major stock exchanges, own portfolios of shopping malls, apartments, or office buildings. As an investor, whether directly or in mutual funds, you get both a share of the rental or lease income from these properties, and the potential for share-price gains - if the underlying real estate rises in value. Through Aug. 31, the average total return on REIT mutual funds was 10.41 percent, well exceeding the 7.45 percent for the Standard & Poor's 500 stock index, says Gail Moss, an analyst at Morningstar Inc., a Chicago research firm. Economic growth helps Solid economic growth this year has boosted commercial construction projects, land-development ventures, and other real estate-linked financial deals. Given the recent resurgence in the US real estate market - following a slump in the early 1990s - REITS are expected to turn in solid gains throughout the remainder of the decade, some experts say. Mark Decker, who heads the National Association of Real Estate Investment Trusts (NAREIT), the main trade group for the industry in Washington, says total return for REITs "could exceed 15 percent this year," perhaps beating the S&P 500 stock index. The S&P 500 is up 11.9 percent as of Oct. 1. An index of REITs tracked by Prudential Securities in New York had risen 12.2 percent as of the end of August. Mr. Decker says about 202 publicly traded REITs are actively traded on major exchanges, such as the New York Stock Exchange, the American Stock Exchange, and the Nasdaq market. The market value of REIT shares now exceeds $100 billion. You can buy or sell shares in a REIT through a stock broker, paying a typical commission. Mutual-fund options Rather than investing directly in REITs, however, people with $1,000 to $2,000 to invest can now buy a diversified portfolio of REIT products through mutual funds. …

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