There's an easier way of following the tycoons and getting more property in your portfolio. You may have read about what's called a real estate investment trust, better known as an REIT.
Let me briefly explain the advantages of REITs and an easy way to gain property exposure in the United States
and across the globe.
REITs trade like stock and allow investors the advantage of participating in large-scale commercial real estate projects. REITs must pass 90% of their taxable income through to shareholders. In exchange, they pay no corporate income tax.
There are a wide variety of REITs on the markets, ranging from apartments and shopping centers to office complexes and hospitals, as well as a variety of other commercial projects.
Advantages of REITs Here's a quick rundown on why you should take a careful look at REITs.
- Inflation Hedge - Real estate is widely considered to be an effective inflation hedge, with values rising along with higher inflation.
- Strong Income/Dividend Yields - Many REITs offer solid dividend yields, because tax laws require that companies distribute around 90% of their income.
- Conservative Management/Liquidity - Since REITs must typically distribute most of their income to investors, management has less of a chance to misuse capital. The trading liquidity of REITs has also increased significantly within the last two decades.
- Diversification/Higher Potential Returns With Lower Risk - REITs are a great way to diversify an existing stock portfolio. And numerous studies by Wilshire show that it can increase returns and lessen volatility.
Take a Global Perspective My advice is to take a global look at property markets, since they oftentimes diverge from stock markets and certainly don't move together.
Here's just one example...
With the Shanghai stock market trading close to three-year lows, the numbers from a far different Pacific Rim market last week were simply eye-catching.
Singapore's $38-billion REIT market has returned an average 37% in 2012, according to data compiled by
Bloomberg. Australia, the largest REIT market in the Asia-Pacific region with $86 billion, advanced 24%.
And for income-hungry investors, Singapore REITs, on average, offer a 6.46% dividend yield, followed by 5% for Australia and 4.93% in Hong Kong.
And according to a recent S&P report, Asia-Pacific property markets not only offer a higher dividend yield than U.S. property, they trade at much lower valuations while offering a return on equity (ROE) four times higher.
There are currently 12 REIT exchange-traded funds on the market covering U.S. and international property markets.
Pick one or two that fits your personal situation. I will leave you with one more piece of advice:
The key to very successful real estate investing is to buy markets that are out of favor.
Good Investing,
Carl
Editor's Note: Global REITs are an excellent way to play the so-called asset bubbles created by the Western world's extremely low-rate environment. They also provide income, growth and an inflation hedge.
But our friends at
The Oxford Club have uncovered something even bigger... It's no bubble - rather a new boom that's not dependent on The Fed or any interest rate. It's the latest way they've discovered to get in on the ground level of a major new gravy train.
But to understand the play, you'll have to first understand the trend. To watch the full presentation on what they call "The Shadow Wars,"
click here.
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