REIT stands for Real Estate Investment Trust, and it's perfect to add to any investment portfolio. In 1960, Congress established this to make investing in real estate a possibility for all investors so that they could have the same opportunities as they did with other stocks and bonds. This made it possible for the average person to invest like the big boys without having to have as much big boy money.
How do REITS earn money? REITs invest in income producing real estate such as apartment buildings, shopping malls, office buildings, and retail stores. Some also invest in hospitals and nursing care facilities. The purchase of mortgages have also been included. Although some REITs are privately owned, they are publicly traded.
When it comes to performance, for 30 years REITs have done better than stocks. One of the best things about REITs is that they pay out in dividends. An average for REIT dividends is about 7%. Not bad, and that doesn't even include if there's an appreciation in your shares.
How can they afford to do that, you might ask. One of the provisions in the 1960 Real Estate Investment Trust Act is that if a REIT paid to their shareholders 90% of the income by way of dividends, they would not have to pay corporate income taxes. This is a win-win for REITs and their investors.
Now that you're convinced that REITs are a smart investment, it's time to get on board. It's not a good idea to buy individual REITs-- you could choose the wrong one. For instance, you might decide that it's a good idea to invest in a REIT that targets office building, but if that market doesn't produce as it had been, then your profits are not as hopeful. As it is true in stocks and in bonds, the same is true for REITs-- diversify. The best way to do that is put your money into a REIT Index Fund. Index funds is a mutual fund that is put together to reflect market indicators such as the Dow Jones or the S&P 500.
The economy is ever changing, and no matter what the status is at the time you decide to invest in REITs, real estate is usually a good way to go. Investing in an Exchange-Traded Mutual Fund, or an ETF, is a great way to diversify your REIT. It's also a wise thing to do, because you leave the choosing of the particular real estate to the professionals.