Back to top

Make Room for 3 Real Estate Funds in Your Portfolio

Read MoreHide Full Article

Per the joint report from, U.S. Census Bureau and the U.S. Department of Housing and Urban Development, sales of new U.S. single-family homes increased more than expected in August. The metric increased 7.1% to 713,000 units last month, boosted by a surge in sales of new homes in the South and West.

Such a positive report indicates that lower mortgage rates have boosted housing market’s fortunes. The report from the Commerce Department also shed light on the fact that the U.S. economy continued to grow moderately. In fact, per the recent Freddie Mac Primary Mortgage Market Survey, 30-year fixed mortgage rate dropped 120 basis points over a year to an average rate of 3.73%.

Federal Reserve’s move to lower interest rates has been supporting the U.S. economy. This is evident from the fact that the country’s housing sector exhibits strength at a time when the global economy is reeling under pressure from trade tensions and weak economic fundamentals.

The National Association of Realtors reported that existing home sales rose 1.3% to a seasonally adjusted annual rate of 5.49 million units in August. This marked the metric’s highest settlement in the past 17 months.

Talking about real estate funding, venture capitalist and private equity investors had poured in about $5.2 billion in real estate startups by the end of 2018. Moreover, angel investors are interested now, more than ever, in tapping the space by investing liquid cash in real estate startups. As a matter of fact, approximately $226 billion is expected to be invested in real estate in 2019.

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 their 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).

DFA Global Real Estate Securities Portfolio (DFGEX - Free Report) fund aims for long-term capital appreciation. The fund seeks to gain exposure to a wide portfolio of securities of U.S. and foreign companies in the real estate industry. It invests with a focus on real estate investment trusts or companies that the advisor evaluates as REIT-like. The fund may pursue its objective by investing in DFA Real Estate Securities Portfolio, DFA International Real Estate Securities Portfolio and in securities of companies operating in the real estate industry.

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 6.2% and 7.2%, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

DFGEX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.24%, which is below the category average of 1.28%.

TIAA-CREF Real Estate Securities Retirement (TRRSX - Free Report) fund seeks maximum total returns over the long run through growth of capital and current income. TRRSX invests a large chunk of its assets in companies primarily involved in operations related to the real estate domain. The fund may invest a maximum of 15% of its assets in securities issued by foreign entities.

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 3.9% and 7%, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

TRRSX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.76%, which is below the category average of 1.20%.

John Hancock II Real Estate Securities 1 (JIREX - Free Report) fund seeks appreciation of capital and income over the long term. JIREX invests primarily in equity securities of companies engaged in operations related to the real estate sector, which includes REITs. The fund invests in securities including common stock, preferred stock and convertible securities. It may invest a maximum of 10% of its assets in securities of companies domiciled outside the U.S. territory.

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 7.3% and 9.2%, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

JIREX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.80%, which is below the category average of 1.20%.

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 >>

Published in