You Reit What You Sow

Real estate investment trusts provide a hedge against stock market downturns

but don’t want the pressure of picking the right mix of REITs, should look to real estate mutual funds. Such funds generally invest in a portfolio of 30 or more REITs.

When choosing a real estate mutual fund, you want one that has a low expense ratio–1% or less; has a proven track record; has been in operation for at least five years; and has low management turnover, advises Martin Cohen, president of Cohen & Steers Capital Management in New York, one of the largest real estate securities management firms in the nation.

Folmar gives other considerations for REIT investing:

  • A greater percentage of assets should be going toward buying properties, not management fees.
  • The portfolio should be diversified. A good mix of properties, for example, would be shopping malls in one region, office buildings in another, and apartment complexes in a different market.
  • Much of this information can be found in the annual report and prospectus. To find out more about REITs and real estate mutual funds, check out the National Association of Real Estate Investment Trusts at www.nareit.com, RealtyStocks at www.inrealty.com, and Morningstar Mutual Funds at www .morningstar.com.

Most financial gurus advise that depending on your risk tolerance, you should have 5% (conservative) to 10% (moderately aggressive) of your portfolio invested in real estate through REITs, real estate mutual funds, or direct property ownership. –
Top 10 Equity and Mortgage REITs

Name

Ticker

Year-to-Date
Total Return*

Novastar Financial Inc. NFI 235.02%
ElderTrust ETT 227.60
Impac Mortgage Holdings Inc. IMH 157.83
Anworth Mortgage Asset Corp. ANH 155.41
Dynex Capital Inc. DX 140.00
Ventas Inc. VTR 136.43
Income Opportunity Realty Trust IOT 121.40
National Health Realty NHR 115.98
Thornburg Mortgage Inc. TMA 115.95
La Quinta Properties Inc. LQI 108.78
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