REITs & Retirement

800px DoralGolfResortNovember2010 300x180 REITs & Retirement

It seems as if specific terms from the investment world only enter public discourse when something bad happens. Think about it: mortgage-backed securities weren’t exactly a hot topic until this asset was connected with the late-2000’s housing crisis. “Derivatives” wasn’t a buzzword among lay people until this trade was singled out as a major culprit in the spate of bankruptcies and failures of the same period. Obscure financial terms and investment activities are left to the professionals–until it’s time to figure out why the economy, once again, went down the tubes.

I’m happy to report that one formerly obscure investment topic has entered the mainstream–and this time, it’s in a positive light. In response to the very strong performance of REITs in the last few years, non-industry news sources are beginning to take note of this burgeoning sector.  In an article entitled “REITs: Are They For You?” U.S. News and World Report explains the functions and benefits of REITs in a way that appeals to a general audience, those looking forward to their retirement and trying to get the most out of their 401(k)s.

The article highlights two important attributes of REITs: 1) Supported by typically resilient real estate assets, they provide a hedge against inflation. 2) They are not highly correlated to the stock market, meaning they offer, at the very least, a stable source of diversification. REITs, then, are as appealing to individual investors and retirement plans as they are to large institutions or high net worth investors. As “REIT” enters the lexicon of laypeople, we can expect the overall popularity of such investments to increase, simply because more people know to explore this option.

CNBC’s Stock Blog echoes these sentiments, with a quote from a portfolio manager at American Century Investments:

Richard Weiss likes to buy American, and he’s leaning toward real estate investment trusts [...] He said real-estate stocks will be driven by low interest rates on mortgages, favorable stock valuations [...] and an improving economic outlook…

There you have it. Bet on REITs and buy American. It’s interesting to note that investing in American REITs, though, isn’t quite what it seems. Numerous U.S. REITs control funds, stakes and portfolios overseas, so maybe “buying American” is more of an ideal.

Either way, it seems that the opportunities available through REIT investment are getting across to the public, and not through exaggerated sales pitches but clear explanations. Those looking to protect and grow their savings are not being told that REITs are a golden goose, but simply a strategic option for diversification and stability. After all, not even multifamily REITs guarantee lofty, year-round returns.

#CRE #finance