{"id":1310,"date":"2025-04-19T02:14:03","date_gmt":"2025-04-19T02:14:03","guid":{"rendered":"https:\/\/staging8.dynaserverx.com\/newenglandtrust.com\/?post_type=newsletter&#038;p=1310"},"modified":"2025-04-19T02:14:03","modified_gmt":"2025-04-19T02:14:03","slug":"equity-reits-is-there-room-for-real-estate-in-your-portfolio","status":"publish","type":"newsletter","link":"https:\/\/staging8.dynaserverx.com\/newenglandtrust.com\/newsletter\/equity-reits-is-there-room-for-real-estate-in-your-portfolio\/","title":{"rendered":"Equity REITs: Is There Room for Real Estate in Your Portfolio?"},"content":{"rendered":"<p>You can buy shares in individual REITs, just as you might buy shares in any publicly traded company, or you can invest through mutual funds or exchange-traded funds. The option to invest in a REIT fund may also be available in your tax-deferred workplace retirement plan. In 2023, it\u2019s estimated that 50% of American households were invested in REITs through one or more of these channels.<sup>1<\/sup><\/p>\n<h2>Income and diversification<\/h2>\n<p>A REIT must pay out at least 90% of its taxable income each year as shareholder dividends. And unlike many companies, REITs generally do not retain earnings, which is why they may provide higher yields than many other types of equity investments. In 2023, equity REITs yielded 3.9%, on average, compared with 1.4% for stocks in the broader S&amp;P 500 Index.<sup>2<\/sup><\/p>\n<p>The real estate industry\u2019s business model and distinct property markets offer a risk-return profile that differs from the other stock market sectors. In some respects, REITs are a unique asset class, and because their share prices do not always follow the movements of stocks or bonds, they can be a helpful tool to broaden asset allocation and increase diversification. Over the 10-year period ending in 2023, equity REITs had a 76% correlation with the S&amp;P 500 and 56% correlation with the corporate and government bond market. Correlations are even lower over 30 years.<sup>3<\/sup> (Diversification and asset allocation are methods used to help manage investment risk; they do not guarantee a profit or protect against investment loss.)<\/p>\n<h2>Performance Match-up: REITs vs. Stocks<\/h2>\n<figure id=\"attachment_1315\" aria-describedby=\"caption-attachment-1315\" style=\"width: 425px\" class=\"wp-caption aligncenter\"><img fetchpriority=\"high\" decoding=\"async\" class=\"wp-image-1315 size-full\" src=\"https:\/\/staging8.dynaserverx.com\/newenglandtrust.com\/wp-content\/uploads\/2025\/04\/WA_24086_Equity-REITs-CHART-e1745028794526.jpg\" alt=\"Annual returns on equity REITs - 2014 = 28.03%; 2015 = 2.83%; 2016 = 8.63%; 2017 = 8.67%; 2018 = negative 4.04%; 2019 = 28.66%; 2020 = negative 5.12%; 2021 = negative 5.12%; 2021 = 41.30%; 2022 = negative 24.95%, 2023 = 11.36%. Annual returns for the S&amp;P 500: 2014 = 13.69%; 2015 = 1.38%; 2016 = 11.96%; 2017 = 21.83%; 2018 = negative 4.38%; 2019 = 31.49%; 2020 = 18.40%; 2021 = 28.71%; 2022 = negative 18.11%, 2023 = 26.29%.\" width=\"425\" height=\"262\" srcset=\"https:\/\/staging8.dynaserverx.com\/newenglandtrust.com\/wp-content\/uploads\/2025\/04\/WA_24086_Equity-REITs-CHART-e1745028794526.jpg 425w, https:\/\/staging8.dynaserverx.com\/newenglandtrust.com\/wp-content\/uploads\/2025\/04\/WA_24086_Equity-REITs-CHART-e1745028794526-300x185.jpg 300w\" sizes=\"(max-width: 425px) 100vw, 425px\" \/><figcaption id=\"caption-attachment-1315\" class=\"wp-caption-text\">Source: National Association of Real Estate Investment Trusts, 2024. REITs are represented by the FTSE Nareit All Equity REITs Index. U.S. stocks are represented by the S&amp;P 500 Composite Total Return Index. The performance of an unmanaged index is not indicative of the performance of any specific security. Individuals cannot invest directly in an index. Past performance is not a guarantee of future results. Actual results will vary.<\/figcaption><\/figure>\n<hr \/>\n<h2>Rate-driven volatility<\/h2>\n<p>Rising interest rates typically reduce demand and may push down values across property markets, and falling rates tend to have the opposite effect. REITs are directly impacted by the level of interest rates because they depend on debt to acquire rent-producing properties. And in a high-rate environment, REIT dividends tend to be less appealing to investors when bonds are offering similar yields.<\/p>\n<p>For these reasons, REIT shares struggled in 2022 and well into 2023, but prices rebounded near the end of that year after Federal Reserve projections indicated that rates had likely peaked. The return on listed equity REITs was 11.4% in 2023.<sup>4<\/sup><\/p>\n<p>Despite concerns about pockets of distress in the commercial real estate market, the prospects for listed REITs may continue to improve as interest rates settle. As a group, listed REITs entered 2024 with solid balance sheets, healthy debt ratios, and access to capital markets, so they could be in a good position to take advantage of buying opportunities.<sup>5<\/sup><\/p>\n<p>The return and principal value of all investments fluctuate with changes in market conditions. Shares, when sold, may be worth more or less than their original cost. Investments seeking to achieve higher yields also involve a higher degree of risk. There are inherent risks associated with real estate investments that could have an adverse effect on financial performance. These risks may include a deterioration in the economy or local real estate conditions, tenant defaults, property mismanagement, and changes in operating expenses (including insurance costs, energy prices, real estate taxes, and the cost of compliance with laws, regulations, and government policies).<\/p>\n<p><em>Mutual funds and ETFs are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.<\/em><\/p>\n<p>1\u20135) National Association of Real Estate Investment Trusts, 2023<\/p>\n<p>This information is not intended as tax, legal, investment, or retirement advice or recommendations, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek guidance from an independent tax or legal professional. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Broadridge Advisor Solutions. \u00a9 2024 Broadridge Financial Solutions, Inc.<\/p>\n","protected":false},"featured_media":1314,"template":"","meta":{"_acf_changed":false},"newsletter-category":[29],"class_list":["post-1310","newsletter","type-newsletter","status-publish","has-post-thumbnail","hentry","newsletter-category-august"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.3.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Equity REITs: Is There Room for Real Estate in Your Portfolio? - New England Trust<\/title>\n<meta name=\"description\" content=\"In Evanston, IL, Robard Flaremoor offers Financial Planning Services &amp; Financial Advice. \u2018Financial Services\u2019 from College Funding to Wealth Protection. \u2018Tax Services\u2019 include Tax Preparation, Tax Reduction, and Tax Management\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/staging8.dynaserverx.com\/newenglandtrust.com\/newsletter\/equity-reits-is-there-room-for-real-estate-in-your-portfolio\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Equity REITs: Is There Room for Real Estate in Your Portfolio? 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