REIT ETFs offer investors excellent income, top quality management and valuable diversification.
Commercial real estate offers investors unrivaled opportunities for dependable current income and the potential for capital appreciation. Despite elevated interest rates and persistent inflation worries, the U.S. and world economies are expanding at a healthy rate. Income-producing buildings such as apartment buildings, self-storage properties and warehouses are in great demand today and should remain high for the foreseeable future.
Real estate investment trusts, or REITs, are specialized companies that buy, hold and manage commercial real estate on behalf of their investors. REITs that own and operate real estate directly are called equity REITs. REITs that invest in or originate commercial real estate mortgages or hold residential or commercial real estate mortgage bonds are called mortgage REITs, or mREITs. Companies that own real estate directly and own financial instruments are known as hybrid REITs.
To maintain their status as REITs and avoid paying income taxes at the corporate level, REITs must, by law, distribute at least 90% of their after-tax income back to investors. For publicly traded REITs, this means paying a steady income to shareholders through regularly scheduled dividend distributions.
REITs should be primarily seen as income vehicles, but there is a great potential for capital appreciation over time.
REITs were introduced to the investing public over 60 years ago. Since that time they've become very popular with income-oriented investors. There are over 200 REITs that trade on U.S. exchanges, and those companies represent hundreds of billions in market capitalization. The REIT landscape can be confusing to individual investors looking for reliable income and growth over the long run.
ETFs that invest in REITs are designed to make REIT investing simple and convenient for all investors. REIT ETFs provide quality professional management – experts choose the REITs to invest in – and offer broad diversification geographically and among real estate asset classes.
For retail investors saving for retirement or for other long-term goals, REIT ETFs are often the best way to own REITs.
