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Tackle Today: Return of the REIT

June 7, 2021

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Real estate is back, baby!


Real estate is one of the most popular asset classes to invest in. But it’s not easy to purchase. It’s expensive, undiversified, subject to renters not paying and requires property management. A long time ago, Wall Street created a vehicle to fix all of these issues – the Real Estate Investment Trust, or REIT for short. Think of it as a basket of companies that own and operate real estate.

You can buy them via Exchange Traded Funds (ETFs) like XLRE, IYR, or VNQ. Instead of having to come up with a sizeable down payment or engage in some clever financial shenanigans to acquire a property, REITs allow you to dollar cost average into the asset class for a few bucks a month.

In 2020, the entire real estate sector bit the dust alongside everything else. But this year, the space is rocketing to the moon. XLRE is already up 23%, putting it on pace for a nearly 50% annualized gain. One of the allures of REITs is their higher dividend yield. Dividends are the way that the rental income gets passed on to investors. XLRE, for example, boasts a yield of 3.41%. The S&P 500, by contrast, is only yielding 1.21%.


Chart of the Day

New Record High for XLRE

REITs like XLRE are booming. Last week’s surge brought newfound attention to the sector. Those owning it for dividends as well as part of a diversified portfolio are loving life right now. That said, its volatility and trending characteristics make it easier to play as an investment or position trade.

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