Real estate investment trusts (REITs) refer to companies that own and operate real estates in order to generate income. Properties included in a REIT portfolio may include apartments, health care facilities, hotels, infrastructure (for instance fiber cables, cell towers, and energy pipelines) office buildings, retail centers, self-storage, timberland, and warehouses.
A REITs was established by the U.S. Congress as an amendment to the Cigar Excise Tax Extension of 1960; of which the provision allows individual investors to buy shares in commercial real estate portfolios that receive income from a variety of properties.
In a previous article, Investingport discussed REITs, the types REITs, as well as their advantages and disadvantages. In this article, we will be looking at how to invest in REITs.
Investing in REITs
REITs are necessary when considering any fixed-income portfolio, as they serve as a means of diversification, generating returns, as well as lower risks. They also generate dividend income and capital appreciation, making them a counterbalance to stocks, bonds, and cash.
An investor can invest in publicly-traded REITs, including REIT mutual funds and REIT exchange-traded funds (ETFs), by acquiring shares through a broker. Shares of a non-traded REIT can be acquired through a broker or financial advisor who participates in the non-traded REIT’s offering.
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