Is There a Vacancy in Your Portfolio?

Healthcare REITs, real estate investment trust, Sheaff Brock REIT portfolio

Is There a Vacancy in Your Portfolio?

As markets have become more unpredictable, investors have begun to seek assets that are less correlated with traditional stock, bond, and cash holdings. While owning real estate has always been one way to diversify assets, direct ownership of property has two big challenges:

  1. as an investment, real estate is illiquid;
  2. maintaining property can be expensive and time consuming.

Since 1960, however, as Sheaff Brock Director Jim Murphy explains, REITs (Real Estate Investment Trusts) have allowed investors the best of both worlds, offering:

  • the non-correlation of alternative investments
  • the liquidity of the stock and bond markets
  • a source of regular income (by paying out 90% of the REITs taxable income in the form of dividends)

REITs are “indirect” investments in portfolios of real estate properties. As Investopedia points out, “Real estate investment trusts are historically one of the best-performing asset classes available.” From the beginning, there have been five basic REIT types:

  • Retail REITs – these typically invest in shopping malls
  • Residential REITs – apartment buildings and manufactured housing
  • Healthcare REITs – hospitals, medical centers, nursing facilities, and retirement homes
  • Office REITs – office buildings with long-term leases
  • Mortgage REITs – these own the mortgages rather than the buildings themselves

Now, the REIT industry has begun to branch out and includes a number of specialty categories, such as storage facilities.

Ever on the alert for opportunities to help clients achieve financial goals through investing, Jim Murphy informs our SheaffBriefs editor, Sheaff Brock is in the process of rolling out its new REIT portfolio. Director Murphy cites three basic reasons investors might consider filling the “vacancy” in their asset mix:

  1. REITs can help investors diversify their income stream.
  2. REITs’ have typically offered higher risk-adjusted performance than small-cap value stocks and the broad stock market
  3. REITs can be a great diversifier in an existing portfolio of stocks and bonds

Most of us are used to the saying “Location, location, location” when describing real estate, Jim Murphy reminds investors. Murphy believes it’s “Allocation, allocation, allocation” when it comes to including real estate in a portfolio.

So, Jim asks, is there possibly a vacancy in your portfolio?

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