REIT background facts
- The REIT industry’s aggregate equity market capitalization has surged substantially from $8.7 billion at the start of 1990 to $1.3 trillion at the end of 2019.
- Changes to the REIT make-up that removed conflicts of interest between shareholders and management aided the industry’s growth. Equity REITs were added into the S&P 500 index in 2001. Following this, REIT shares have captivated more investors, including general money managers, pension funds, hedge funds, and individual investors. Consequently, the average monthly dollar trading volume for REITs has risen from approximately $350 million in 2000 to around $8 billion in 2019, producing good liquidity for every investor.
- Coupled with higher trading volume, REIT stock price volatility has also increased noticeably. Although the stock market is emotional in the short-term, it is often times rational in the long-term. That being so, increased volatility produces greater risk short term, as well as greater potential returns long term. Exercising good fundamental analysis is most valuable and ought to be rewarded.
- Even though REITs’ over the long-term have outpaced other stocks, majority of investor’s portfolios are underutilized in relation to real estate securities. Institutional investor allocations to real estate range from 5% to 20% with an average of around 10% – despite this the Real Estate asset class is 20% of their investible domain. Also be aware that home ownership is not income yielding real estate; individuals reside in their homes but must retire and live off their investments.
4 Great REIT Background Facts Conclusion
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