Why invest in REITs
REITs are a relatable investment for most investors. Backed by tangible real estate and typically distributing most of their income as dividends, REITs can be considered a liquid format for owning a portfolio of real estate.
The total return from REITs is competitive. They provide high dividends and the potential for long-term capital appreciation.
Because of the strong dividend income REITs provide, they can be an important investment for retirement savers and retirees who require a continuing income stream to meet their living expenses.
Here are the key reasons to invest in REITs:
- Competitive total returns: The historical return from REITs is comparable to stocks and higher than bonds.
- High and stable dividends: REIT dividends are sourced from rents which are typically secured via long term contracts. This gives them stability through a variety of market conditions.
- Liquidity: Shares of publicly traded REITs are easily traded on stock exchanges and the transaction costs are much lower than for transacting physical property. (Find out How to Invest in REITs .)
- Easy to understand: Real estate is an easy asset class to understand and REITs provide access via a liquid publicly traded format. Investors are less likely to be blindsided by a risk they did not understand. (Learn more in Guide to REIT Investment .)
- Portfolio diversification: REITs allow for portfolio diversification across multiple properties rather than a lump sum being sunk into a singular asset. REITs also provide diversification for a traditional stock and bond portfolio.