Real Estate Funds a Better Bet Than Stocks

By: Kathleen Pender: REALTOR® Magazine Online
In the first quarter of this year, real estate funds returned 13.74 percent on average, easily beating every other category of domestic stock fund tracked by market research firm Morningstar Inc.

Since early 2000, real estate funds have posted a cumulative return of 237 percent, handily trumping the S&P 500 stock index, which has lost 2.82 percent in that time span. While most real estate funds invest the lion's share of their assets in real estate investment trusts (REITS), some also invest in publicly traded home builders and mortgage REITs that purchase securities backed by home loans.

These funds rose to prominence following the market crash of 2000 that saw many investors shy away from tech and growth stocks in favor of commercial real estate investments. On the downside, REIT dividends average 4.5 percent today compared to 7.71 percent at the end of 2000, prompting some investors to be concerned that REITs are overpriced.