Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense and managed with care, it is about the safest investment in the
Is it better to own actual property or REITs?
- You can get a REIT just as cheap as an index tracker
- Much cheaper than direct property
- Has performed better than direct property
- On average decreases volatility and increases returns (slightly)
- An $100,000 investment in a Vanguard REIT index in 1996, would have grown to over $740,000 by the end of 2015, producing a 10.8% annual return, assuming dividends were reinvested, which is slightly higher than the S&P.
- Greg Fisher, who writes for Forbes, compared two scenarios. A portfolio of 60% stocks and 40% bonds, and one which included 10% in REITS. He looked at 1990 to 2010, and found a portfolio which contained 10% REITS averaged 8.83% per year as opposed to 8.72% per year, and was less volatile, as REITS performed during periods where stocks underperformed.
- The only disadvantage compared to direct property is no leverage. You can’t get into negative equity unlike a house but you also can’t benefit from a mortgage-levereage situation.