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4 Real Estate Funds to Buy on a Firm Economy and Dovish Fed
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A likely Fed rate cut, decent U.S. economy and considerably low mortgage rates are currently making the case stronger for investing in real estate mutual funds.
After all, real estate companies are more likely to grow in a scenario where developmental activities in the sector can be carried out with much ease. Also, sound disposable income and relatively low mortgage rates are desirable for homebuyers.
Let us, thus, take a look at real estate mutual funds from an investment perspective.
A Fed Rate Cut Could Boost Real Estate
Earlier this month, in its two-day congressional testimony, the Federal Reserve sent strong signals of an interest rate cut in the upcoming FOMC meeting (Jul 30-31). In fact, majority of investors are now expecting a quarter-point rate cut, as indicated by the CME Group’s FedWatch tool.
Should the Fed follow through a reduction in its rates, it would greatly boost real estate companies. Lower rates mean that these companies can borrow money easily from banks to carry out development and construction activities. This would also encourage homebuyers to invest in real estate since paying off a home mortgage loan would become easier.
Decent Job Gains, Low Unemployment to Push Purchasing Power
Secondly, the U.S. economy is in decent shape. New job additions in June exceeded expectations. Total nonfarm payroll employment rose by 224,000 last month, and job gains were fairly broad-based. In fact, average hourly earnings also increased in June, adding 6 cents to reach $27.90 for all employees on private nonfarm payrolls. Also, June’s unemployment rate of 3.7% remained at a 50-year low.
Simply put, the American workforce is growing. And as more people find employment across industries, their disposable income is bound to increase too. The rise in purchasing power, in turn, will boost demand for the finer things in life, more specifically houses.
Real Estate Amid Top 5 Gainers of the S&P 500 in 2019 So Far
Lastly, among the 11 sectors of the S&P 500, the Real Estate Select Sector SPDR (XLRE) has been one of the top five gainers on a year-to-date basis. Declining mortgage rates is likely the reason behind this gain. The 30-year mortgage rate is currently at 3.81%, lesser than the long-term average of 8.04%.
Our Choices
We have selected four real estate mutual funds that you could consider adding to your portfolio. These funds either carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Moreover, these funds have provided encouraging returns on a year-to-date basis. Additionally, the minimum initial investment is within $5000.
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).
Davis Real Estate Fund Class A (RPFRX - Free Report) aims for total return by combining growth and income. The fund invests the majority of its assets in securities of companies in the real estate industry. RPFRX usually invests in the common stocks of U.S.-based companies but may also invest in non-U.S. companies.
This Zacks sector – Real Estate product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
RPFRX carries a Zacks Mutual Fund Rank #1 and has returned 18.6% on a year-to-date basis. The fund has a minimum initial investment of $1000.
Fidelity Select Construction & Housing Portfolio (FSHOX - Free Report) fund seeks capital growth. The fund invests most of its assets in the designing and construction of residential, commercial and industrial facilities etc. FSHOX primarily invests in common stocks. The non-diversified fund invests in U.S. and non-U.S. issuers alike.
This Zacks sector – Other product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FSHOX carries a Zacks Mutual Fund Rank #2 and has returned 26.6% on a year-to-date basis. The fund has no minimum initial investment.
John Hancock Funds II Real Estate Securities Fund Class 1 (JIREX - Free Report) invests the lion’s share of its assets in equity securities of real estate investment trusts and real estate companies. These equity securities may comprise common stocks, preferred stocks and securities that are convertible to common stocks. The non-diversified fund may also invest up to 10% of its assets in foreign real estate companies’ securities.
This Zacks sector – Real Estate product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
JIREX carries a Zacks Mutual Fund Rank #2 and has returned 18.9% on a year-to-date basis. The fund has no minimum initial investment.
T. Rowe Price Real Estate Fund (TRREX - Free Report) invests the majority of its assets in equity securities of real estate companies. The fund is likely to pool a sizeable amount of its assets into real estate investment trusts. The non-diversified fund aims for capital growth by combining capital growth and current income.
This Zacks sector – Real Estate product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
TRREX carries a Zacks Mutual Fund Rank #2 and has returned 16.1% on a year-to-date basis. The fund has a minimum initial investment of $2500.
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4 Real Estate Funds to Buy on a Firm Economy and Dovish Fed
A likely Fed rate cut, decent U.S. economy and considerably low mortgage rates are currently making the case stronger for investing in real estate mutual funds.
After all, real estate companies are more likely to grow in a scenario where developmental activities in the sector can be carried out with much ease. Also, sound disposable income and relatively low mortgage rates are desirable for homebuyers.
Let us, thus, take a look at real estate mutual funds from an investment perspective.
A Fed Rate Cut Could Boost Real Estate
Earlier this month, in its two-day congressional testimony, the Federal Reserve sent strong signals of an interest rate cut in the upcoming FOMC meeting (Jul 30-31). In fact, majority of investors are now expecting a quarter-point rate cut, as indicated by the CME Group’s FedWatch tool.
Should the Fed follow through a reduction in its rates, it would greatly boost real estate companies. Lower rates mean that these companies can borrow money easily from banks to carry out development and construction activities. This would also encourage homebuyers to invest in real estate since paying off a home mortgage loan would become easier.
Decent Job Gains, Low Unemployment to Push Purchasing Power
Secondly, the U.S. economy is in decent shape. New job additions in June exceeded expectations. Total nonfarm payroll employment rose by 224,000 last month, and job gains were fairly broad-based. In fact, average hourly earnings also increased in June, adding 6 cents to reach $27.90 for all employees on private nonfarm payrolls. Also, June’s unemployment rate of 3.7% remained at a 50-year low.
Simply put, the American workforce is growing. And as more people find employment across industries, their disposable income is bound to increase too. The rise in purchasing power, in turn, will boost demand for the finer things in life, more specifically houses.
Real Estate Amid Top 5 Gainers of the S&P 500 in 2019 So Far
Lastly, among the 11 sectors of the S&P 500, the Real Estate Select Sector SPDR (XLRE) has been one of the top five gainers on a year-to-date basis. Declining mortgage rates is likely the reason behind this gain. The 30-year mortgage rate is currently at 3.81%, lesser than the long-term average of 8.04%.
Our Choices
We have selected four real estate mutual funds that you could consider adding to your portfolio. These funds either carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Moreover, these funds have provided encouraging returns on a year-to-date basis. Additionally, the minimum initial investment is within $5000.
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).
Davis Real Estate Fund Class A (RPFRX - Free Report) aims for total return by combining growth and income. The fund invests the majority of its assets in securities of companies in the real estate industry. RPFRX usually invests in the common stocks of U.S.-based companies but may also invest in non-U.S. companies.
This Zacks sector – Real Estate product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
RPFRX carries a Zacks Mutual Fund Rank #1 and has returned 18.6% on a year-to-date basis. The fund has a minimum initial investment of $1000.
Fidelity Select Construction & Housing Portfolio (FSHOX - Free Report) fund seeks capital growth. The fund invests most of its assets in the designing and construction of residential, commercial and industrial facilities etc. FSHOX primarily invests in common stocks. The non-diversified fund invests in U.S. and non-U.S. issuers alike.
This Zacks sector – Other product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FSHOX carries a Zacks Mutual Fund Rank #2 and has returned 26.6% on a year-to-date basis. The fund has no minimum initial investment.
John Hancock Funds II Real Estate Securities Fund Class 1 (JIREX - Free Report) invests the lion’s share of its assets in equity securities of real estate investment trusts and real estate companies. These equity securities may comprise common stocks, preferred stocks and securities that are convertible to common stocks. The non-diversified fund may also invest up to 10% of its assets in foreign real estate companies’ securities.
This Zacks sector – Real Estate product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
JIREX carries a Zacks Mutual Fund Rank #2 and has returned 18.9% on a year-to-date basis. The fund has no minimum initial investment.
T. Rowe Price Real Estate Fund (TRREX - Free Report) invests the majority of its assets in equity securities of real estate companies. The fund is likely to pool a sizeable amount of its assets into real estate investment trusts. The non-diversified fund aims for capital growth by combining capital growth and current income.
This Zacks sector – Real Estate product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
TRREX carries a Zacks Mutual Fund Rank #2 and has returned 16.1% on a year-to-date basis. The fund has a minimum initial investment of $2500.
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 >>