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REIT Investing
Date Added: September 1st, 2005
Article provided by TeenAnalyst.com
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There are many people that are interested in earning higher rates of return than savings and money market accounts, CD's, and treasury bonds offer. The returns that they are looking for are contained within the stock market. However, their tolerance for risk is very low. If this sounds like you, then one type of investment you might want to research is the Real Estate Investment Trust (REIT).
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The basic idea behind REIT's is pretty easy to understand. A Real Estate Investment Trust is somewhat like a mutual fund in that they have a portfolio in which they invest their money. But instead of having a portfolio of stocks and bonds, REIT's have portfolios of land, office buildings, residential housing, and many more forms of real estate.
Real Estate Investment Trusts hope to earn their profit by investing in these forms of real estate and then earn revenue through the appreciation of the underlying value and through monthly rent and leases.
Real Estate Investment Trusts are still traded on stock exchanges in the form of stocks, even though they are special kinds of investments. Like stocks, they report their earnings, dividends, and other news.
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Advantages
REIT's have a few nice advantages to them. Unlike the average stock, REIT's pay very high dividends. In fact, the average REIT has a dividend yield of 8.2%.
This high dividend yield offers many investors an excellent source of income. The dividends are also seen as safe because most REIT's have an excellent track record of paying a dividend every single quarter.
They are also seen as fairly safe investments. Real estate investing has been around for centuries and the value of real estate has appreciated steadily over the years. Also, the dividends that a REIT pays reflects its growth because the dividends generally increase steadily each year.
Disadvantages
REIT's are not the perfect investment and they aren't for everyone. Every REIT is different and picking the right one is not always an easy thing to do. To be really successful at investing in REIT's, you need to have a good understanding of the real estate markets.
Also, REIT's have not performed very well in the last few years. Many underperform most stocks greatly. However, their prices don't always react to corrections in the stock market and this is what makes REIT's safer than most stocks.
If you are interested in REIT's, I strongly recommend that you research them in-depth. Real estate investing isn't something that everyone has an understanding of and you should have at least a decent understanding of it before considering these. However, there are some real estate mutual funds that offer you the ability to invest in multiple REIT's through their portfolio and not have to research all the stocks on your own. These funds might offer you another way for you to diversify and hopefully earn a higher rate of return.
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Stocks (The Basics)
This article is for anybody who wants a brief overview of the basics of stocks. Articles on more advanced topics can also be found throughout this site…
Dividends and Capital Gains
Learn what they are and how they make people money…
Stock Dividends
This article explains dividends a little more…
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Another Great Site!
Be sure to head over to TeenAnalyst for lots of great investment articles!
TeenAnalyst.com
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