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Real-estate funds lead the pack
Real-estate funds have posted an average annualized return of 33 percent over the last three years, according to Morningstar. That's the top performance among the fund categories it tracks.
The Associated Press
BOSTON — The housing market may finally be coming back, with home prices rising again and mortgage rates at record lows.
But there's far greater strength in commercial real estate. Check out the recent investment returns of stock mutual funds that specialize in companies owning income-producing property, from office buildings to hotels.
Real-estate funds have posted an average annualized return of 33 percent over the past three years, according to Morningstar. That's the top performance among the fund categories it tracks.
Year-to-date, the funds are up nearly 17 percent. That's about double the average return for diversified stock funds.
What's more, real-estate funds provide dividend income. The stocks that these funds invest in — known as real-estate investment trusts, or REITs — are required to distribute at least 90 percent of their taxable income to shareholders in order to escape corporate taxes. REITs generate income from properties they own, and often operate.
Funds that specialize in REITs typically hand out quarterly payments, representing the total payout from the fund's holdings. Investors can either take dividends as cash, or reinvest by purchasing more fund shares.
REIT yields are attractive at a time when ultralow interest rates make it hard for investors to earn much unless they're willing to take on additional risk. The average dividend yield of a benchmark REIT index is 3.2 percent.