Real estate investment trusts (REITs) are a popular way to invest in real estate through stock since they allow individual investors to have instant access to real estate opportunities that would otherwise be far too large and risky.
If you’re interested in investing in the real estate industry, but don’t have the time or expertise to handle it yourself, REITs are definitely worth considering as an option. This guide will explain how REITs work, how to invest in them, and what you need to know about investing in REITs.
What is a REIT?
There are three main types of real estate investment: direct, indirect, and synthetic. Direct is simple—you just buy buildings or land and hold them for a long time.
Indirect is exactly that—the investor doesn’t really own anything but pays somebody else who does to manage their money in exchange for a cut of whatever profits are made.
Pros & Cons of Investing in REITs
While there are a number of reasons you might want to invest in REITs, there are also some downsides that you need to consider. The following is a quick look at some of the pros and cons associated with these investment vehicles. […]
What Are Some Other Types of Trust Funds?
Because there are so many different types of trusts, your financial advisor will likely recommend you put more than one type of fund in your trust. This way, your money is invested in a diversified portfolio. Here are some other trust funds that are similar to REITs: mutual funds, real estate limited partnerships, hedge funds, and exchange-traded funds (ETFs).
How Do I Invest in a REIT?
REITs are publicly traded companies that invest in real estate. So, before you dive into REIT investing, it’s a good idea to understand what REITs are and how they work.
What Is the Best Way to Buy Individual Stocks?
Some investors say they prefer buying individual stocks because it’s cheaper than investing in mutual funds. But it’s important to consider that you may be sacrificing diversification and liquidity because most mutual funds can buy thousands of stocks while individual stocks usually represent only one company. (See also: Mutual Funds vs. Individual Stocks.) How do you decide? There are four things you should consider when deciding whether to invest in an individual stock versus a mutual fund. The pros and cons of each option include
Should I Invest in Mutual Funds Instead?
There’s no doubt that REITs and mutual funds are two excellent ways to invest in real estate, but there’s no guarantee that either will give you a return on your investment. While real estate tends to be a safer bet than stocks, both investments carry risk.
Final Thoughts on Investing in a REIT
As an investor, it is your responsibility to do as much research as possible before committing your money to any investment. A REIT may be right for you, but every investment has its own unique characteristics and risks.
Be sure that you understand these factors before investing in a REIT. There are many online resources available for researching REIT companies and similar financial instruments.