A Real Estate Investment Trust (REIT) is a more convenient real estate investment that breaches the gap between low and high risk with usually a middle ground of return. Basically a  REIT is a company that owns or finances income-producing real estate.

The concept is similar to mutual funds, the company provides investors with regular income streams, diversification and long-term capital appreciation all bundled into a single investment that can be purchased like a stock.

REITs offer investors several benefits

Diversification:  in the long term, many REIT equity returns have shown a slightly better investment to the returns of the broader stock market.

  • Dividends: the stock exchange-listed REITs provide a stable income stream to its investors.
  • Liquidity: stock exchange-listed REITs shares can be easily bought and sold.
  • Performance: in the long-term forecasts, some stock exchange-listed REITs returns outperformed the stock market.
  • Transparency: the stock exchange-listed REITs have to operate under the same rules as other public companies for securities regulatory and financial reporting purposes.

It is important to keep in mind that there are a range of Real Estate Investment Trusts focusing on different areas of real estate from apartment buildings, corporate buildings to commercial plazas and a REITs past performance is no indicator of future performance. Due diligence is important when choosing a REIT for your portfolio. Market conditions, both forseen and unseen will impact the fund’s performance.