REIT Investing
Provided by FinancialContent.com
By Chris Stallman
| E-mail
There
are many people that are interested in earning higher rates of return
than savings and money market accounts, CD's, and treasury bonds
offer. The returns that they are looking for are contained within
the stock market. However, their tolerance for risk is very low.
If this sounds like you, then one type of investment you might want
to research is the Real Estate Investment Trust (REIT).
The basic
idea behind REIT's is pretty easy to understand. A Real Estate
Investment Trust is somewhat like a mutual fund in that they have
a portfolio in which they invest their money. But instead of having
a portfolio of stocks and bonds, REIT's have portfolios of land,
office buildings, residential housing, and many more forms of real
estate.
Real Estate Investment Trusts hope to earn their profit
by investing in these forms of real estate and then earn revenue
through the appreciation of the underlying value and through monthly
rent and leases.
Real Estate
Investment Trusts are still traded on stock exchanges in the form
of stocks, even though they are special kinds of investments. Like
stocks, they report their earnings, dividends, and other news.
Advantages
REIT's have a few nice advantages to them. Unlike
the average stock, REIT's pay very high dividends. In fact,
the average REIT has a dividend yield of 8.2%.
This high dividend yield offers many investors an excellent
source of income. The dividends are also seen as safe because most
REIT's have an excellent track record of paying a dividend every
single quarter.
They are also seen as fairly safe investments. Real
estate investing has been around for centuries and the value of
real estate has appreciated steadily over the years. Also, the dividends
that a REIT pays reflects its growth because the dividends generally
increase steadily each year.
Disadvantages
REIT's are
not the perfect investment and they aren't for everyone. Every
REIT is different and picking the right one is not always an easy
thing to do. To be really successful at investing in REIT's,
you need to have a good understanding of the real estate markets.
Also, REIT's have not performed very well in the
last few years. Many underperform most stocks greatly. However,
their prices don't always react to corrections in the stock
market and this is what makes REIT's safer than most stocks.
If you are interested in REIT's, I strongly recommend
that you research them in-depth. Real estate investing isn't
something that everyone has an understanding of and you should have
at least a decent understanding of it before considering these.
However, there are some real estate mutual funds that offer you
the ability to invest in multiple REIT's through their portfolio
and not have to research all the stocks on your own. These funds
might offer you another way for you to diversify and hopefully earn
a higher rate of return.
Previous
Article - Next Article
Like this article?
Bookmark
It
