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Why REIT ETFs are Beating the Market

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REITs, or real estate investment trusts, are outperforming the broader market this year. The Vanguard Real Estate ETF (VNQ), most popular fund in the space, is up about 31% in 2021, whereas the S&P 500 (SPY - Free Report) has gained about 19%.

Certain categories within REITs like shopping centers, apartments and self-storage have done much better, as they benefit from reopening. Residential and commercial real estate rents are strongly rebounding this year, after last year’s plunge due to the pandemic.

Apartment rents surged as younger workers returned to cities and rising home prices prevented them from owning. It remains to be seen whether a surge in Delta infections and delay in return to offices being announced by many companies will impact these REITs again.

REITs have also benefited from inflation concerns, as they have historically provided some hedge against inflation

Research shows REITs are highly correlated with equities in the short term but over the longer term, they exhibit positive correlation with real estate and low or even negative correlation with equities. Thus, they add diversification benefits to the portfolio.

Nuveen Short-Term REIT ETF (NURE - Free Report) invests in REITs with short-term lease agreements which may exhibit less price sensitivity to interest rate changes. The iShares Residential and Multisector Real Estate ETF (REZ - Free Report) holds residential, health care, and specialized REITs.

Please watch the short video above to learn more about REIT ETFs.


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