Gold 401K

Fidelity Precious Metals Ira

According to Morningstar, the Real Estate category for mutual funds has been the top performing category on a year-to-date basis with the second-place, runner up being the Precious Metals category. The sign here is quite clear: investors have found this traditionally “bad” category to be more lucrative than even Gold. But after such a hefty run up in asset prices, does Real Estate still make much sense if investing in mutual funds?

Here are three reasons why Real Estate funds certainly do make a lot of sense on a long-term basis:

1) Most real estate mutual funds invest in trusts to help provide steady income. Although yield from a typical real estate mutual fund will be low, the fact that many of the income trusts and actual securities will pay dividends tells a positive: these companies are making money, and enough of it to pay out gains to the investors. This, after all, is what all investors would love to see. Unlike some of the smaller, retail homebuilders who continue to struggle even with tax credits to benefit buyers and other investors, many of the larger commercial real estate companies and trusts continue to make money, which translates into income for the investor.

2) Income trusts also invest in commercial properties, meaning they stand to benefit tremendously from a turnaround in the economy. Commercial real estate will benefit once people start getting back to work (more spending on luxury clothing and other items to be found in at shopping centres), once business investment starts to rise (more people needing office space for retail, commercial or industrial ventures) and once the commercial real estate stabilizes the way it is expected to. In the long-run, even with some income trusts having risen drastically already, the types of real estate holdings these trusts own still represent a great value to the investor. Remember, this sector has been oversold for quite some time, meaning even after triple-digit gains in the past year, they are still well, well well below their five year moving average.

3) Homebuilders have put the worst behind them and are now only starting to see renewed interest in their product. Whether a homebuilder is a company that builds homes, communities or residential highrises, the verdict is out that the worst of the housing crisis is now in the past. While prices on homes is expected to continue to drop for the next year, with these companies getting buyers firming up offers and moving in, those that have survived to date are expected to reap the rewards in the long-term. Even with some residential homebuilders seeing security prices increases to the tune of 300-500%, like their commercial and income trust counterparts, they remain a good value in the long-term.

In summary, investing in real estate mutual funds should remain a popular investment choice for many mutual investors out there, particularly for the long-term where a normalizing market and increasing demand will push the underlying assets to higher prices.

–> Small Cap Funds Reviewed all month of May at MutualFundSite.org.

Chris has more than 17 years of financial services experience. He currently manages a small portfolio of websites including one about the Best Queen Size Mattress at BestQueenSizeMattress.com.