HomeUnion Investment revealed that despite the hit received by the real estate investment trusts, it is still one of the best option if an investor would want to balance the existing stock in the portfolio and get a steady flow of income in the process. Here are some tips provided when it comes to betting commercial real estate.
Real estate investment trusts or REITs are those companies that handles dozens of commercial real estate such as shopping malls, buildings and hotels. REITs are treated just like any other stocks thus major exchanges are used in the trading. The investors are able to get their part through dividends. These dividends are bulk of the rent which are distributed in a regular interval.
Many investors have gone to the trouble of moving the level of their REITs depending on the level of the housing market as well. This has been a cause for headache despite the fact that REITs have very little to no connection with housing. The protection set between REITs and bonds with low yields are not the same yet both are considered an alternative to one another.
It is a given equation that as the price begins to drop, the bond yields will have a reverse reaction which is to rise. This is why more and more investors are in fear of more losses in the coming months. Add to that the recent indications by the Federal Reserve in their intention to slowly increase the interest rate this year 2015. It has been argued that since bond yields continues to rise, it is more likely for investors to pull out of the real estate especially for those who have an REIT index that is 23 per cent in the previous year.
These is also an existing argument that the rising rate should not be the only reason why investors should leave REITs. When it comes to the economy of the United States, commercial properties have a bigger impact compared to REITs especially when it comes to stock market indexes. It should also be noted that having an REIT fund in an investor’s portfolio will yield to around 5 to 10 per cent.