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Which Real Estate Mutual Fund to Buy: JIREX or FRIFX?

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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 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.

Meanwhile, the Real Estate Select Sector SPDR Fund (XLRE) has gained 19.5% over the past year. So, investing in real mutual funds seems prudent as of now. Let us look at two of the best funds from the space and find out which one is a better investment.

John Hancock Funds II Real Estate Securities Fund Class 1 (JIREX - Free Report)

The 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 stocks, preferred stocks 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 are 10.5% over a 3-year period and 6.7% over a 5-year period. To see how this fund performed compared with its category, and other #1 and #2 Ranked Mutual Funds, please click here.  

John Hancock Funds II Real Estate Securities Fund Class 1, as of the last filing, allocates its assets in the top two major groups; Intermediate Bond and Foreign Bond. Further, as of the last filing, Equinix Inc and Prologis Inc were the top holdings in JIREX.

This Zacks Mutual Fund Rank #2 (Buy) was incepted in October 2005 and is managed by John Hancock. JIREX carries an expense ratio of 0.80% and requires a minimal initial investment of $0.

Fidelity Real Estate Income Fund (FRIFX - Free Report)

The fund seeks higher-than-average income as well as appreciation of capital. It invests the lion’s share of its assets in real-estate companies as well as other real-estate related investments. The fund also invests in preferred and common stocks of real estate investment trusts, debt securities of real estate entities as well as commercial and other mortgage-backed securities.

This Sector-Real Estate product has a history of positive total returns for over 10 years.  Specifically, the fund’s returns are 8.2% over a 3-year period and 6.9% over a 5-year period. To see how this fund performed compared with its category, and other #1 and #2 Ranked Mutual Funds, please click here.

Fidelity Real Estate Income Fund, as of the last filing, allocates its assets in the top two major groups, Intermediate Bond and Large Value. Further, as of the last filing, Amazon and American Tower were the top holdings for FRIFX.

This Zacks Rank #1 (Strong Buy) was incepted in February 2003 and is managed by Fidelity. FRIFX carries an expense ratio of 0.75% and requires a minimal initial investment of $0.

To Conclude

While both JIREX and FRIFX are buy-rated funds, upon having a closer look, we find that the former is a clear winner. Meanwhile, both the funds are dirt cheap. However, the administrative and other operating expenses of FRIFX are higher than JIREX’s.

Also, coming to yearly returns, JIREX returned 17.7% over the past year compared with 13.3% returned by FRIFX in the same period. Meanwhile, FRIFX offers lower risk compared to JIREX. FRIFX has a 3-year beta of 0.2 compared with JIREX’s 0.4. However, JIREX is worth the risk, given its lower costs and consistency in providing high returns on investment.

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