REITs vs. Real Estate Mutual Funds

Welcome to MutualFunds.com. Please help us personalize your experience.

Select the one that best describes you

Your personalized experience is almost ready.

Join other Individual Investors receiving FREE personalized market updates and research. Join other Institutional Investors receiving FREE personalized market updates and research. Join other Financial Advisors receiving FREE personalized market updates and research.

Thank you!

Check your email and confirm your subscription to complete your personalized experience.

Thank you for your submission, we hope you enjoy your experience

REITs vs. Real Estate Mutual Funds

Mutual Fund Education

REITs vs. Real Estate Mutual Funds

Sam Bourgi Oct 22, 2019



In this article, we will explore the differences between these two asset types.


REITs


This category of property investment is broken down into three main types:

  • Equity REIT
  • Mortgage REIT
  • Hybrid REIT

As the names imply, an equity REIT invests in and owns properties, while a mortgage REIT invests in mortgages. A hybrid REIT combines the two. Regardless of their structure, REITs can invest in both residential and commercial properties.

To qualify as a REIT, the corporation must have at least 100 shareholders, be managed by a board of directors, and pay at least 90% of its taxable income in the form of dividends annually.

Some of the leading REITs in 2019 include the Simon Property Group (SPG), Equity Residential (EQR), and Public Storage (PSA).

Check out the top real estate mutual funds here


Real Estate Mutual Funds


Real estate mutual funds offer many of the same benefits as REITs but are said to provide more diversification benefits and lower transaction costs. Since they are managed professionally, real estate mutual funds benefit from the knowledge and research of an entire firm.

Unlike REITs, mutual funds don’t trade like stocks. You can purchase them directly through investment companies or brokerages. Examples of leading real estate mutual funds include Vanguard Real Estate Index Fund (VGSIX), DFA Real Estate Securities Portfolio (DFREX), and Fidelity Real Estate Investment Fund (FRIFX).

Want to learn more about real estate mutual funds? Click here.


Risks to Consider


Use the Mutual Funds Screener to find the funds that meet your investment criteria.

Some investors take solace in the fact that the Federal Reserve is lowering interest rates again. Banks are already passing on the savings to their customers, and this has partly come in the form of lower mortgage rates. All is well, right?

Not quite. The Fed being forced to cut interest rates after a decade of ultra-loose monetary policy should raise alarm bells about the health of the U.S. economy. The interplay between monetary policy and the U.S. economy is a risk that investors should consider before investing in property – whether directly or indirectly through REITs and real estate mutual funds.


The Bottom Line


Sign up for our free newsletter to get the latest news on mutual funds.


Sign up for Advisor Access

Receive email updates about best performers, news, CE accredited webcasts and more.

Please Enter Your Email
Please Select Your Advisor Type

Popular Articles

Download Our Free Report

Why 30 trillion is invested in mutual funds book