Word: reit
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With interest rates rising, some investors are suddenly avoiding real estate like a termite-infested house. Last month the average real estate investment trust (REIT) fell 15%. Yet if the past few years have taught us anything, it's that a slug of real estate lends tremendous stability to an investment portfolio. So don't fall victim to the rate jitters. REITs can thrive so long as any interest-rate climb is slow and takes place over an extended period, says Christopher Haley, a REIT analyst at Wachovia Securities. And that's just the scenario many economists anticipate...
...have REITs taken such a beating? The trusts, which are publicly traded companies, own things like office complexes, warehouses and shopping malls. They collect rent and pay out nearly all their income as dividends, which makes them well suited to investors who prize income. But as rates rise, REITs face more competition from other securities like bank CDs and bonds, which dampens REIT values. Still, the average REIT now yields 5.7%, way more than the 10-year Treasury bond...
MUNIS AND REAL ESTATE INVESTMENT TRUSTS (REITS) Both losers. Why buy a municipal bond when you can get a higher yield and only modestly more risk with a tax-free preferred stock? REIT dividends would remain taxable. They make sense only in an IRA. --By Daniel Kadlec
...MUNIS AND REAL ESTATE INVESTMENT TRUSTS (REITS) Both losers. Why buy a municipal bond when you can get a higher yield and only modestly more risk with a tax-free preferred stock? REIT dividends would remain taxable. They make sense only...
...taxable account, municipal bonds look good right now, says Vanguard's McKinnon. Low-cost muni funds are available from Vanguard, as well as from Fidelity, T. Rowe Price and USAA, with yields of 3% to 4%, tax free. McKinnon also likes REIT funds, which invest not in bonds but in the income-rich shares of real estate investment trusts. Vanguard's REIT fund yielded 5.3% last year; another economical choice, Cohen & Steers Realty Shares, yields...