REIT Mutual Fund Performance

So what  about performance? Over the  long term, REIT Mutual Funds have  produced total returns comparable to stocks in general. In fact, over  the  past 35 years, REIT returns have  actually been higher. In the  context of an overall investment portfolio, REITs add  diversification because their values don’t  always move in tandem with other investments.

For investments that move  perfectly in lock step, their beta or correlation
to the  overall stock market is 1. For investments always moving in opposite directions, the  correlation is 0. Over the  long term, the  correlation between stocks and REITs has  been about 0.6 (which is about the  level of correlation between foreign  stocks and U.S. stocks).

One final attribute of REITs we want  to highlight is the  fairly substantial  divi- dends that REITs usually pay. Because these dividends are generally fully tax- able  (and thus not  subject to the  lower  stock dividend tax rate), you should generally avoid  holding REITs outside of retirement accounts if you’re  in a high tax bracket (for instance, during your  working  years).

In case you care, and  you may well not,  the  reason for the  high dividends is the legal requirement in REIT charters that they  have  to distribute 95 percent of their income. In other words, REITs can legally only retain a maximum of 5 percent of their net income; they  must distribute everything else to the shareholders.

http://buyrentalproperty.hubpages.com/hub/REIT-Mutual-Funds