Through the third quarter of 2006, the Standard & Poor’s Real Estate Investment Trust (REIT) Index was up over 25 percent a year for the prior three years. The same index gained almost 22 percent a year for the previous five years. In both cases, the results were far better than those of any other U.S. index from Standard & Poor’s.
Although you can’t count on such returns in the future, you might want to include real estate securities in a diversified portfolio. As indicated, real estate stocks and funds holding those stocks can deliver high returns. In addition, they might provide bear market protection.
In 2000-2002, for example, the S&P 500 index had three straight down years. But real estate funds had gains each of those years, according to Morningstar. That research company lists T. Rowe Price Real Estate, JP Morgan U.S. Real Estate, and Third Avenue Real Estate Value among its picks for real estate funds.
