Real Estate Investment Trusts (equity REITs) are generally defined as a product that uses investor’s pooled capital to invest in a variety of commercial real estate ventures. By law 90% of a REIT’s taxable income must be distributed to investors.

REIT subsectors include industrial, office, retail, residential, lodging, specialty and self-storage properties. We utilize index-type mutual funds or exchange-traded funds that invest in virtually every U.S. REIT, proportionate to their relative market capitalization.

REITs have demonstrated the potential for strong capital growth over the long term, which further bolsters the case for their inclusion in a well diversified, balanced portfolio. More importantly, REITs are considered a separate asset class because of their low correlation with other asset classes. Notably, REITs are a form of equity but exhibit risk/return characteristics different from common stocks. Similarly, REITs generate a strong level of investment income, but provide returns that are distinct from fixed income securities.

This unique asset class provides a liquid means of holding real estate investments while generating a dependable source of investment income. This construct makes REITs particularly well suited for non-taxable vehicles such as IRAs and 401k accounts.