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May 01, 2008 at 04:00 AM
With major global stock markets on sputter mode, real estate investment trusts (REITs) are proving to be a haven. Through mid-April, the DJ Wilshire REIT ETF (RWR) has posted year-to-date gains of 7.9 percent and other real estate ETFs are experiencing similar strong performance.
According to the National Association of Real Estate Investment Trusts (NAREIT), an industry trade group based in Washington D.C., its composite equity REIT index has enjoyed compounding returns of 10.22 percent over the past 10 years, as of February 29, 2008. That includes a string of seven consecutive years of positive performance. Over the same time period, the S&P 500 posted average gains of 4.07 percent.
Highly regarded individuals in the investment community like David Swensen continue to advocate REITs too. He recommends a 20 percent allocation to REITs in a diversified investment portfolio. Swenson manages Yale University’s endowment which recorded a 28 percent gain last year.
Most of the broad market REIT ETFs have exposure to all the important real estate segments including apartment, healthcare, office, retail, and industrial properties. Not included in REIT indexes are homebuilding stocks.
