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The acronym "REIT" in gold lettering

Specialized Funds

Real Estate Mutual Funds With High Dividend Yields

David Dierking Oct 24, 2017



In case you are wondering whether mutual funds are right for you at all, you should read why mutual funds, in general, should be a part of your portfolio.


What is a REIT?


Check out our guide to real estate funds here.


Why Might Investors Choose REITs?


Many advisors acknowledge that real estate belongs in many portfolios thanks to its above average yields, low correlation to other asset classes and overall risk-reducing benefits. REITs can also be used as a way to play certain economic trends. For example, the aging of America has put healthcare companies and the services they provide in high demand. Investors looking to capitalize on that trend may want to check out healthcare REITs, which typically invest in senior living communities, medical office buildings, hospitals and nursing facilities.


Five Highly Rated REIT Mutual Funds



Each of these funds has billions of dollars in assets, so liquidity and tradability are high. Vanguard, not surprisingly, is one of the low cost leaders, although the DFA Real Estate Securities Fund is even cheaper. All have produced returns in the 9-10% range, putting them nearly on par with the S&P 500. Real estate funds have been riskier than the S&P 500 over the past several years, but their low correlation with other equity sectors has made them better fits in a broader portfolio.

Be sure to check our list of global real estate funds here. Explore the complete list of real estate funds here.


Key Considerations for Investors


On the other hand, real estate can be negatively impacted by rising interest rates. If there is a prolonged lack of demand in rental properties or the ability to charge and raise rents, REIT funds will likely underperform.


The Bottom Line


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