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JuneHow Real Estate Has Performed as an Investment?
A good proxy for the real estate sector is known as the NAREIT
Equity REIT Index. “The NAREIT Equity REIT Index is designed
to provide the most comprehensive assessment of overall
industry performance, and includes all tax-qualified real estate
investment trusts (REITs) that are listed on the NYSE, the
American Stock Exchange or the NASDAQ National Market List.”
The NAREIT Equity REIT Index was up 17.2% for the year as of
March 31, 2019, after being down 4% last year. When viewing
the sector over a longer term (from 2004 to 2018), the NAREIT
Equity REIT Index has averaged 8.5%. If viewed over 20 years,
the NAREIT Equity REIT Index has averaged 9.9%. To get those
returns, investors have endured a lot of risk. Between 2004 and
2018, real estate investors saw gains as high as 31.6% in 2004,
and losses as low as -37.7% in 2008. As of March 31, 2019, the
current asset class yield of U.S. Real Estate was 4.3%. (Current
yield is simply a calculation of the annual income in interest and
dividends divided by the current price.) As a point of reference,
90 U.S. Treasury Bills, which are considered risk-free, were yielding 2.43%.
Although real estate has done well over a longer time period, and
really well recently, past performance is not indicative of future
returns. It’s also important to note that indexes are unmanaged,
individuals cannot invest directly in an index, and index returns
do not include fees or expenses. If you have a well-diversified
investment portfolio, you more than likely have exposure to real
estate. The S&P 500 Index (https://us.spindices.com/indices/equity/
sp-500) has 3% exposure to real estate and includes investments
such as American Tower Corp, Simon Property Group, Inc., Crown
Castle International Corp, Public Storage, and Prologis, Inc.
Advisory services offered through Per Stirling Capital Management,
LLC. This material is provided for informational purposes
only. Individual advice should be provided by the appropriate
tax, legal, financial, or accounting professional.
Written by: Kenneth Price, CFP®, CFA®, ChFC®, CLU®, AEP®
