Investors have traditionally flocked to real estate investment trusts (REITs) for dividends, but over the past few years they’ve been getting a lot more: capital growth.
According to the National Association of Real Estate Investment Trusts (NAREIT), an industry trade group based in Washington DC, its composite equity REIT index has enjoyed compounding returns of 5.04 percent over the past 10 years. On top of these performance gains, REIT investors collected another 6.99 percent in the form of dividend income. Over the same time period, the S&P 500 posted average gains of 4.67 percent.
REITs are publicly traded companies that invest in real estate.
Highly regarded individuals in the investment community like David Swensen continue to advocate real estate too.
In his book “Unconventional Success: A Fundamental Approach to Personal Investment,” he recommends a 20 percent allocation to real estate in a diversified investment portfolio. Swenson manages Yale University’s endowment, which recorded a 28 percent gain last year.
Through late September, the SPDR DJ Wilshire REIT ETF (RWR) posted year-to-date gains of 1.27 percent. Other broad-market real estate ETFs have been posting similar performance gains, despite declines in global stock indexes.