By Kristin Hovencamp
The most significant real estate investment most people ever make will be their home. But what about owning real estate in an investment portfolio? Unlike stocks and bonds, alternative vehicles such as hedge funds, private equity and real estate are less straightforward for investors to gain entry. One way to add commercial or residential real estate to a portfolio is by purchasing shares in a Real Estate Investment Trust (REIT). A REIT is a company that owns, operates or finances income-producing real estate properties.
Access. Before Dwight Eisenhower created the 1960’s Cigar Excise Tax Extension, most individuals did not have the resources to invest in private, large-scale real estate funds. According to the National Association of REITs, the evolution of REITs has transformed the commercial and residential investing landscape. REITs are a vital part of the economy, investors’ portfolios, and local communities.
Liquid securities. Unlike private assets, a REIT can trade on major stock exchanges and extend transparency to shareholders. Investors buy and sell shares just as they would a stock, ETF, or mutual fund. “Billions of dollars have poured into REITs this year,” writes Jason Zweig, author of multiple books, and Wall Street Journal columnist.
Regular income stream. Capital appreciation, inflation protection, and dividend income are qualities that attract long-term investors to REITs. REITs are required by law to distribute at least 90% of their annual taxable income to shareholders in the form of dividends.
Portfolio diversification. Investors seek exposure to stocks, bonds, and alternative investments to generate returns independent of one another and spread risk across the asset classes. REITs complement traditional investments because of their low correlation and risk-adjusted returns. In times of market uncertainty, a REIT can help dampen portfolio volatility.
There’s something to be said for owning a real asset. Income-producing REITs can play an essential role in a sustainable, diversified portfolio.
HAZLETT WEALTH MANAGEMENT, LLC is independent of Raymond James and is not a registered broker/dealer. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc. Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investing involves risk, and you may incur a profit or loss regardless of the strategy selected. Past performance may not be indicative of future results. 675 Sun Valley Road, Suite J1 + J2 Ketchum, Idaho 83340 208.726.0605. HazlettWealthManagement.com
