REAL ESTATE FUNDS

For those of you who struggle with deciding upon which funds to choose for your 401K, I will be reviewing all of the different categories of funds available to 401K investors.  Today, I will be focusing on another 401k investing option - Real Estate funds or REITs.

Many, but not all 401K plans offer REITs as an investment option.

Real Estate Investment Trusts (REITs) offer a unique way to invest in real estate without directly owning property..

REITs are companies that own, operate, or finance income-producing real estate across a range of property sectors. These include residential, commercial, retail, and industrial properties. By investing in REITs, individuals can gain exposure to the real estate market without the need to buy and manage properties themselves.

REITs are required by law to distribute at least 90% of their taxable income to shareholders in the form of dividends. In addition to dividend yields, REITs also offer the potential for capital appreciation. As the value of the underlying real estate properties increases, so too can the value of the REITs. 

It's important to note that, like any investment, REITs come with risks. These include economic downturns, fluctuations in real estate values, and changes in interest rates. 

The chart below shows why I am not a big fan of REITs.  Their performance over the last 20 years is well below the performance of large cap index funds like the S&P 500 and the Nasdaq.  

REITs can also be just as volatile as the stock market.  They have had some periods in the past where they have performed almost as well as the stock market, but they are more likely to drag down your results than to increase your investment returns. 

Happy Investing,

Phil

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Disclaimers The Beyond Buy & Hold newsletter is published and provided for informational and entertainment purposes only. We are not advising, and will not advise you personally, concerning the nature, potential, value, or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. Beyond Buy & Hold recommends you consult a licensed or registered professional before making any investment decision.

Investing in the financial products discussed in the Newsletter involves risk. Trading in such securities can result in immediate and substantial losses of the capital invested. Past performance is not necessarily indicative of future results. Actual results will vary widely given a variety of factors such as experience, skill, risk mitigation practices, and market dynamics.