Per the joint report from, U.S. Census Bureau and the U.S. Department of Housing and Urban Development, homebuilding in the United States rebounded in the month of October as permits for building new homes hit a 12-year high. The metric came in at 1.461 million units in the month.
Further, single-family authorizations increased 3.2% to 909,000 in October from the prior month. Also, authorization of units in buildings with five units or more came in at 505,000 in the month. This was the fastest rate of authorizations of building permits since 2007.
This rise was strongly supported by a 38.2% monthly increase in the number authorizations of buildings with two and four housing units. While permitting activity increased across all the regions, the Northeast posted the largest monthly increase of 19.5%.
Meanwhile, housing starts increased 3.8% from September to 1.314 million units in October. Furthermore, single-family construction rose for the fifth straight month to 936,000 in October, 2% higher than that in September.
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.
For investors looking to park their money in the real estate sector, mutual funds are the cheapest and most-convenient options. This category of funds also offers solid protection against inflation. The real estate sector has recently seen tough times but the presence of this investment vehicle generally adds stability to a portfolio. Usually, volatility in property prices is far less than the extent experienced by stocks. Adding such funds to a widely diversified portfolio would increase returns, while significantly reducing the associated risk.
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, the 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 12.9% and 9.9%, 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 #1 and an annual expense ratio of 0.76%, which is below the category average of 1.22%.
John Hancock Funds II Real Estate Securities Fund Class 1 (JIREX - Free Report) 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 11.6% and 9.3%, 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 1.22%.
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