REITs: Bruised not beaten

The REIT party isn’t over. In fact, the correction might have uncovered a buying opportunity.

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Is the REIT party over? Or has the recent correction uncovered a buying opportunity for Real Estate Investment Trusts? Expected higher interest rates may partly explain the pullback. But if these increases don’t materialize, there’s potential for upside performance. Apartment rental REITs are another important consideration for REIT investors. If housing prices continue to rise and incomes continue to stagnate, apartment rentals look like a more viable investment option. Bear in mind, of course, all this is speculative.

Even so, having REIT exposure in your portfolio has benefits, mainly through diversification. But why not diversify your REIT holdings, too? The BMO Equal Weight REIT (ZRE) ETF may be the best of the bunch, as the sector is relatively small and dominated by a few names. The top three holdings of iShares’ cap-weighted REIT index fund (XRE) represent roughly 42% of the fund. The top three holdings for ZRE, on the other hand, are roughly 18% of the fund.

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