Real Estate Investment Trusts (REITS) can be publicly-traded and available as ETF's (Exchange Traded Funds, like stocks), through mutual fund companies or as specific companies.
From my viewpoint, your personal residence may be considered your real estate portion of your portfolio but you cannot rebalance it very well within the context of your other investments. Your personal residence is also not diverse geographically (you have one personal residence) and it is residential when there are other styles of real estate (i.e. industrial, retail, commercial, equity, etc.). Your home also does not pay you rental income or a dividend.
So, there is a legitimate argument for holding some REITS (much of the time, they are less correlated to stocks/bonds) as investments but, keep in mind, that if you own a mutual fund you probably own some real estate companies within it.
Publicly-traded REITS though act more like stocks than inflation-protected real estate, so an alternative may be non-publicly traded REITS. There are privately-held and publicly-held options here. For most, privately-held are out of the price-range of those with less than $5 million or so of investable assets.
Public companies, non-publicly traded have the advantage of not being priced daily (maybe once per year instead) and so are less volatile or so it appears and do pay you a dividend taxed at regular interest income rates. Hold them in retirement accounts.
The disadvantages may outweigh their use:
(1) Illiquid - you may be stick holding one for 7-10 years before being able to sell
(2) Dividend rate originally offered may be changed and even lowered from a 6-7% range to 2-3% if, like now, the economy suffers in the area your REIT is held
(3) Sales charges, high annual fees and depressed values of their holdings may erode your gains
(4) Share value may drop when re-evaluated on a yearly basis (but you are not suppose to worry since you may not be able to sell it anyway)
(5) Public companies are audited but there is always the possibility of accounting shenanigans
An Introduction
Hi. Welcome to BourGroup and my blog. Phil
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.