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The 6 Best REIT Funds to Buy

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Rising interest rates and the decline of shopping malls have weighed on real estate investment trusts (REITs) over the past few years. The good news is that many REITs – special tax-advantaged businesses provide investors with exposure to real estate – are now trading at bargain prices.

That makes now an opportune time to jump broadly into this traditionally dividend-friendly asset class via mutual and exchange-traded funds.

REITs – which own and often operate real estate such as apartments, office buildings, malls and industrial properties – get certain tax breaks, but in return must pass through 90% of their income to shareholders every year. That makes them good yield plays; currently, the average REIT yields 4%, which is higher than most stock or high-quality bond yields.


They also look cheap right now. While the Standard & Poor’s 500-stock index is trading at roughly 24 times trailing 12-month earnings, the S&P U.S. REIT sector is changing hands at a price-to-funds-from-operations (FFO, an important measure of REIT profitability) of 16.

A 5% to 10% weighting in REITs makes a good diversifier for a portfolio of stocks and bonds. While rising interest rates are considered bad news for REITs – as bonds compete with them for income investors’ money, and because much of the real estate industry is dependent on bond money – REITs historically have shown some resilience during rising-rate periods.

Investors can easily access wide swaths of this industry by investing in real estate funds and ETFs. Here’s a look at six top REIT funds right now:

SEE ALSO: The 25 Best Low-Fee Mutual Funds You Can Buy

Data is as of July 27, 2018.


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