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3 Real Estate Mutual Funds to Buy as the Sector Stages a Comeback
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The markets closed 2023 on a high note, with investors widely anticipating Fed interest rate cuts as early as March 2024. Since the beginning of the new year, trade has been cautious and markets have been correcting itself from the overbought position. However, the gloom and doom which had surrounded Wall Street a year ago seems to be behind us.
According to the U.S. Census Bureau’s report, in November 2023, there was a 0.4% increase in U.S. construction spending. The data revealed that construction spending reached $2,050.1 billion after making adjustments compared to the revised estimate of $2,042.5 billion in October. This robust growth in the construction sector indicates that the real estate sector is looking lucrative again after the vagaries of 2022. The Real Estate Select Sector SPDR (XLRE) rose 12.4% in 2023, supporting the notion.
The private construction industry played a role in driving this growth, with spending reaching $1,595 billion in November after adjusting for seasonal variations, which represents a 0.7% increase from the revised October estimate of $1,584.4 billion. Real Estate mutual funds that invest in real estate assets such as residential and commercial properties are likely to experience significant benefits from this thriving private construction sector.
Also, privately-owned housing starts in November were at a seasonally adjusted annual rate of 1,560,000. This is a whopping 14.8% higher than the revised October estimate of 1,359,000. In addition, real estate is usually considered a long-term buy-and-hold option as these companies regularly declare dividends that are consistently higher than the stock market and outperform the equity indexes.
Real estate mutual funds provide much-required stability and growth potential. Hence, astute investors should consider such funds at present. Mutual funds, in general, reduce transaction costs and diversify portfolios without an array of commission charges that are mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
We have thus selected three real estate mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy), have positive three-year and five-year annualized returns and minimum initial investments within $5000, and carry a low expense ratio.
Columbia Real Estate Equity (CREYX - Free Report) invests the majority of its net assets in equity securities of companies principally engaged in the real estate industry, including REITs. CREYX may invest in equity REITs, mortgage REITs and hybrid REITs. It is non-diversified.
Dan Winterbottom has been the lead manager of CREYX since Jul 2, 2023. Three top holdings for CREYX are 15% in Prologis, 8.7% in Equinix and 6% in Welltower.
CREYX’s 3-year and 5-year annualized returns are 5.3% and 5.2%, respectively. The fund has a dividend yield of 2.8%, and its net expense ratio is 0.84% compared to the category average of 1.08%. CREYX has a Zacks Mutual Fund Rank #1. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Fidelity Real Estate Investment Portfolio (FRESX - Free Report) invests primarily in common stocks of companies principally engaged in the real estate industry and other real estate-related investments. FRESX uses fundamental analysis of factors such as each issuer's financial condition and industry position, as well as market and economic conditions, to select investments. It is non-diversified.
Steven J. Buller has been the lead manager of FRESX since Dec 30, 1997. Three top holdings for FRESX are 10.3% in Prologis, 7.9% in Crown Castle and 6.9% in Equinix.
FRESX’s 3-year and 5-year annualized returns are 4.8% and 3.3%, respectively. The fund has a dividend yield of 2.1%, and its net expense ratio is 0.72% compared to the category average of 1.08%. FRESX has a Zacks Mutual Fund Rank #2.
VY CBRE Global Real Estate (IRGIX - Free Report) invests most of its assets in equity securities of companies that are primarily involved in the real estate industry. IRGIX advisors invest half of their assets in real estate activities and the other half in actual real estate.
Joseph P. Smith has been the lead manager of IRGIX since Feb 27, 2007. Three top holdings for IRGIX are 7.3% in Equinix, 6.4% in Public Storage and 6.2% in Simon Property Group.
IRGIX’s 3-year and 5-year annualized returns are 2.4% and 3%, respectively. The fund has a dividend yield of 2%, and its net expense ratio is 0.68% compared to the category average of 1.21%. IRGIX has a Zacks Mutual Fund Rank #1.
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3 Real Estate Mutual Funds to Buy as the Sector Stages a Comeback
The markets closed 2023 on a high note, with investors widely anticipating Fed interest rate cuts as early as March 2024. Since the beginning of the new year, trade has been cautious and markets have been correcting itself from the overbought position. However, the gloom and doom which had surrounded Wall Street a year ago seems to be behind us.
According to the U.S. Census Bureau’s report, in November 2023, there was a 0.4% increase in U.S. construction spending. The data revealed that construction spending reached $2,050.1 billion after making adjustments compared to the revised estimate of $2,042.5 billion in October. This robust growth in the construction sector indicates that the real estate sector is looking lucrative again after the vagaries of 2022. The Real Estate Select Sector SPDR (XLRE) rose 12.4% in 2023, supporting the notion.
The private construction industry played a role in driving this growth, with spending reaching $1,595 billion in November after adjusting for seasonal variations, which represents a 0.7% increase from the revised October estimate of $1,584.4 billion. Real Estate mutual funds that invest in real estate assets such as residential and commercial properties are likely to experience significant benefits from this thriving private construction sector.
Also, privately-owned housing starts in November were at a seasonally adjusted annual rate of 1,560,000. This is a whopping 14.8% higher than the revised October estimate of 1,359,000. In addition, real estate is usually considered a long-term buy-and-hold option as these companies regularly declare dividends that are consistently higher than the stock market and outperform the equity indexes.
Real estate mutual funds provide much-required stability and growth potential. Hence, astute investors should consider such funds at present. Mutual funds, in general, reduce transaction costs and diversify portfolios without an array of commission charges that are mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
We have thus selected three real estate mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy), have positive three-year and five-year annualized returns and minimum initial investments within $5000, and carry a low expense ratio.
Columbia Real Estate Equity (CREYX - Free Report) invests the majority of its net assets in equity securities of companies principally engaged in the real estate industry, including REITs. CREYX may invest in equity REITs, mortgage REITs and hybrid REITs. It is non-diversified.
Dan Winterbottom has been the lead manager of CREYX since Jul 2, 2023. Three top holdings for CREYX are 15% in Prologis, 8.7% in Equinix and 6% in Welltower.
CREYX’s 3-year and 5-year annualized returns are 5.3% and 5.2%, respectively. The fund has a dividend yield of 2.8%, and its net expense ratio is 0.84% compared to the category average of 1.08%. CREYX has a Zacks Mutual Fund Rank #1. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Fidelity Real Estate Investment Portfolio (FRESX - Free Report) invests primarily in common stocks of companies principally engaged in the real estate industry and other real estate-related investments. FRESX uses fundamental analysis of factors such as each issuer's financial condition and industry position, as well as market and economic conditions, to select investments. It is non-diversified.
Steven J. Buller has been the lead manager of FRESX since Dec 30, 1997. Three top holdings for FRESX are 10.3% in Prologis, 7.9% in Crown Castle and 6.9% in Equinix.
FRESX’s 3-year and 5-year annualized returns are 4.8% and 3.3%, respectively. The fund has a dividend yield of 2.1%, and its net expense ratio is 0.72% compared to the category average of 1.08%. FRESX has a Zacks Mutual Fund Rank #2.
VY CBRE Global Real Estate (IRGIX - Free Report) invests most of its assets in equity securities of companies that are primarily involved in the real estate industry. IRGIX advisors invest half of their assets in real estate activities and the other half in actual real estate.
Joseph P. Smith has been the lead manager of IRGIX since Feb 27, 2007. Three top holdings for IRGIX are 7.3% in Equinix, 6.4% in Public Storage and 6.2% in Simon Property Group.
IRGIX’s 3-year and 5-year annualized returns are 2.4% and 3%, respectively. The fund has a dividend yield of 2%, and its net expense ratio is 0.68% compared to the category average of 1.21%. IRGIX has a Zacks Mutual Fund Rank #1.
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 >>