REITs Aren't a True Alternative
They're just stocks that look a little different.
A version of this article appeared in the May 2019 issue of Morningstar ETFInvestor. Download a complimentary copy of Morningstar ETFInvestor by visiting the website.
Real estate investment trusts have historically been able to diversify stocks and bonds while providing positive returns. They are also subject to legal constraints distinct from common stocks that dictate their sources of revenue and dividend payments. Those traits may lead some to classify REITs as an alternative investment. Yet, REITs are still subject to the same risks as other businesses, and they have become more closely integrated with the broader market. So, the diversification benefits they have provided in the past may not hold up in the future.
Daniel Sotiroff has a position in the following securities mentioned above: VNQ. Find out about Morningstar’s editorial policies.