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3 Funds to Benefit From a Rebound in Housing Starts
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Homebuilding in the United States sprung back to life in October on an upswing in multi-family housing starts. A series of dismal economic reports about America’s housing industry has been recently released. This has led to speculation that the economy is headed for yet another housing bubble. Having said that, the U.S. housing market is gaining strength, courtesy of steady demand and a business-friendly environment.
Economists largely believe that this downturn is momentary unlike what was the case in 2008. Further, robust labor market conditions and increase in millennials will surely lead to improving conditions for the housing market. Under such encouraging conditions, investing in mutual funds from the real estate sector seems prudent.
Housing Starts Gather Steam in October
Per the latest joint report by U.S. Census Bureau and the U.S. Department of Housing and Urban Development, privately-owned housing starts in the United States increased at a seasonally adjusted annual rate of 1,228,000. This marked an increase of 1.5% in the metric from the revised September estimate of 1,210,000
Further, starts for the multifamily housing segment increased 10.3% to 363,000 units last month. Also, the stock of housing under construction registered an uptick of 0.5%. This marked its highest level in more than 11 years. During the last economic crisis about 10 years ago, markets were overheated with a glut of new houses. Further, subprime mortgage financing weighed heavily on the markets, resulting in a bump in speculative inventory.
Taking a closer look at the current scenario, the housing industry is actually reeling under the pressure of extreme paucity of skilled labor amid rising material prices. It is, therefore, evident that the housing space is recovering and lackluster economic data will not mar the industry’s long term prospects.
Why Invest in Real Estate?
Investing in the real estate sector adds stability to a portfolio, mainly because the volatility in property prices is far less than what is experienced by stocks. Hence, investors willing to hold long-term positions would do well to consider real estate mutual funds as they add stability and bring steady returns to a portfolio. This category of funds also offer superior protection against inflation and is a solid investment choice.
3 Best Choices
Given such circumstances, we have highlighted three real estate mutual funds that are poised to gain from such factors. These funds also carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Moreover, these funds have encouraging three and five-year returns. Additionally, the minimum initial investment is within $5000.
We expect these funds to outperform peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance but also on the likely future success of the fund.
The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Fidelity Advisor Real Estate Income A (FRINX - Free Report) invests heavily in debt and mortgage-backed securities of real estate companies and preferred and common stocks of REITs. FRINX invests a bulk of its assets in securities of real estate companies and other real estate related investments.
This Sector – Real Estate product has a history of positive total returns for over 10 years. Specifically, the fund's returns over the three and five-year benchmarks are 6% and 6.1%, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.
FRINXhas a Zacks Mutual Fund Rank #1 and an annual expense ratio of 1.07%, which is below the category average of 1.21%.
American Century Global Real Estate Investor (ARYVX - Free Report) invests a huge portion of its assets in securities that are issued by REITs and real estate companies. Although the fund invests mainly in developed markets, it may also invest in emerging markets.
This Sector – Real Estate product has a history of positive total returns for over 10 years. Specifically, the fund's returns over the three and five-year benchmarks are 2.5% and 3.7%, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.
ARYVXhas a Zacks Mutual Fund Rank #1 and an annual expense ratio of 1.13%, which is below the category average of 1.31%.
Principal Real Estate Securities R5 (PREPX - Free Report) seeks growth of total returns. PREPX invests the majority of its assets in equity securities of real estate companies. The fund focuses on value equity securities.
This Sector – Real Estate product has a history of positive total returns for over 10 years. Specifically, the fund's returns over the three and five-year benchmarks are 5% and 8.5%, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.
PREPX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 1.07%, which is below the category average of 1.21%.
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3 Funds to Benefit From a Rebound in Housing Starts
Homebuilding in the United States sprung back to life in October on an upswing in multi-family housing starts. A series of dismal economic reports about America’s housing industry has been recently released. This has led to speculation that the economy is headed for yet another housing bubble. Having said that, the U.S. housing market is gaining strength, courtesy of steady demand and a business-friendly environment.
Economists largely believe that this downturn is momentary unlike what was the case in 2008. Further, robust labor market conditions and increase in millennials will surely lead to improving conditions for the housing market. Under such encouraging conditions, investing in mutual funds from the real estate sector seems prudent.
Housing Starts Gather Steam in October
Per the latest joint report by U.S. Census Bureau and the U.S. Department of Housing and Urban Development, privately-owned housing starts in the United States increased at a seasonally adjusted annual rate of 1,228,000. This marked an increase of 1.5% in the metric from the revised September estimate of 1,210,000
Further, starts for the multifamily housing segment increased 10.3% to 363,000 units last month. Also, the stock of housing under construction registered an uptick of 0.5%. This marked its highest level in more than 11 years. During the last economic crisis about 10 years ago, markets were overheated with a glut of new houses. Further, subprime mortgage financing weighed heavily on the markets, resulting in a bump in speculative inventory.
Taking a closer look at the current scenario, the housing industry is actually reeling under the pressure of extreme paucity of skilled labor amid rising material prices. It is, therefore, evident that the housing space is recovering and lackluster economic data will not mar the industry’s long term prospects.
Why Invest in Real Estate?
Investing in the real estate sector adds stability to a portfolio, mainly because the volatility in property prices is far less than what is experienced by stocks. Hence, investors willing to hold long-term positions would do well to consider real estate mutual funds as they add stability and bring steady returns to a portfolio. This category of funds also offer superior protection against inflation and is a solid investment choice.
3 Best Choices
Given such circumstances, we have highlighted three real estate mutual funds that are poised to gain from such factors. These funds also carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Moreover, these funds have encouraging three and five-year returns. Additionally, the minimum initial investment is within $5000.
We expect these funds to outperform peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance but also on the likely future success of the fund.
The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Fidelity Advisor Real Estate Income A (FRINX - Free Report) invests heavily in debt and mortgage-backed securities of real estate companies and preferred and common stocks of REITs. FRINX invests a bulk of its assets in securities of real estate companies and other real estate related investments.
This Sector – Real Estate product has a history of positive total returns for over 10 years. Specifically, the fund's returns over the three and five-year benchmarks are 6% and 6.1%, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.
FRINXhas a Zacks Mutual Fund Rank #1 and an annual expense ratio of 1.07%, which is below the category average of 1.21%.
American Century Global Real Estate Investor (ARYVX - Free Report) invests a huge portion of its assets in securities that are issued by REITs and real estate companies. Although the fund invests mainly in developed markets, it may also invest in emerging markets.
This Sector – Real Estate product has a history of positive total returns for over 10 years. Specifically, the fund's returns over the three and five-year benchmarks are 2.5% and 3.7%, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.
ARYVXhas a Zacks Mutual Fund Rank #1 and an annual expense ratio of 1.13%, which is below the category average of 1.31%.
Principal Real Estate Securities R5 (PREPX - Free Report) seeks growth of total returns. PREPX invests the majority of its assets in equity securities of real estate companies. The fund focuses on value equity securities.
This Sector – Real Estate product has a history of positive total returns for over 10 years. Specifically, the fund's returns over the three and five-year benchmarks are 5% and 8.5%, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.
PREPX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 1.07%, which is below the category average of 1.21%.
Want key mutual fund info delivered straight to your inbox?
Zacks' free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >>