Things You Should Know About REITs

Things You Should Know About REITs

A real estate investment trust is a critical part of any stock and bond portfolio. These offer higher potential returns with lower overall risk and diversification benefits. After all, they offer investors dividend income coupled with the hope of capital appreciation--a good balance of stocks, cash, and bonds. Keep reading to learn things you need to know about Real Estate Investment Trust.
Different types of Real Estate Investment Trust
Around the world, there are different types of REITs depending on the type of real estate holdings:


A real estate investment fund which manages completed properties, such as residential or rental condos.


To qualify, these investment funds need at least 24% of their investments to be in retail businesses, such as malls and individual stores.


A typical purpose for these trust funds is to buy up healthcare-focused real estate like hospitals, retirement homes, nursing homes, and medical centers.


Roughly 10% of a real estate mutual fund's assets are devoted to mortgages instead of physical properties.


As a result, these real estate investment trust funds primarily invest in and manage offices, so their primary source of income is rent from long-term tenants.

How to invest?

It is possible for investors to buy stocks quickly when real estate investment trusts are listed on major stock exchanges. REITs are predominantly listed on public stock exchanges.
Mutual funds or exchange-traded funds (REIT ETFs) allow investors to invest in a range of stocks in the entire REIT index. The process of buying a private REIT and a non-trading public REIT is more complicated. Typically, such investments are restricted to financial institutions and individuals.

Diversification tool

In the last forty years, portfolios that divided investments 50/50 between the S&P 500 and a REIT index returned 15.2%, which is an equivalent level of success to a portfolio of just the S&P 500. The best part of the cake is that risk is 12% lower than with the S&P 500 index.

How REITs make money?

Generally, the income is collected through rentals. For this purpose, they buy or develop a real estate company. Earnings generated by a company are given to shareholders in the form of a dividend, which is distributed quarterly. Real estate investment trusts can also earn money by acquiring and reselling buildings.
But many Real Estate Investment Trusts (REITs) are different from traditional ones. They don't buy property. Instead, they raise funds for real estate deals and then earn revenue off the interest from the investment. A mortgage real estate investment trust doesn't own real estate; instead, it raises money from investors.

Investing advantages

The benefits of real estate investment with the convenience of stocks trading on the open market. Just like all the other examples mentioned above, REITs are not shares in other stocks, so they also provide diversified investments. In addition, they offer higher risk-adjusted returns, which also reduces the volatility of the portfolio as a whole.
What makes real estate investment trusts really special, however, is the quality of dividends. REITs provide consistent and predictable cash distributions, plus long-term success and above-market returns. Unlike other real estate investing strategies, there is not usually a lack of liquidity with real estate mutual funds.


Through mutual funds, it has become increasingly possible for those with financial needs to do the same with investments in Real estate investment trust, to maximize a diverse investment, for all types of investors, and for the pursuit of income that's obtained in a timely manner. Equity REITs own property in various sectors of the industry, such as office space, retail, and residential.

Send Your Message

Bengaluru, Karnataka
Disclaimer: Any content mentioned in this website is for information purpose only and Prices are subject to change without notice. This website is just for the purpose of information only and not to be considered as an official website.