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Featured Advisor

Srbo Radisavljevic
Managing Principal/Investment Advisor

Edge Portfolio Management


State: IL

At Edge, a low client to advisor ratio allows for personal and customized service for each individual.  Our goal is to work as a team for each client to provide not only portfolio management but wealth coordination and financial planning.  We make every effort to have frequent communication with our clients and to provide timely response to calls and emails.  I also enjoy spending time with my wife and three kids, following Chicago sports, enjoying ethnic cooking, and serving as a school board member for Norridge School District 80.

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Income-Starved Investors Seek REITS

A REIT can offer investors a steady stream of income as well as the potential for long-term growth.

Economic uncertainty is driving investors seeking income and inflation protection toward a real estate investment trust, or REIT, an alternative to low-yielding treasury bonds and volatile stocks. 

Assets held in funds that invest in REITs have reached a record $96 billion, according to a recent analysis by Citigroup Global Markets reported in Investment News. In 2011, alone, investors have added $3.7 billion to REITs.

 “In terms of total return performance, equity REITS have historically outperformed many peer asset classes during periods of slow economic growth, rising inflation, and rising interest rates,” according to Morningstar analyst Philip Martin.

 Morningstar researchfinds that a REIT can play an important role in reducing portfolio risk and improving returns. A diversified portfolio of stocks, bonds, treasury bills and alternative investments that allocated 20 percent to equity REITs experienced a 10.5 percent return with lower risk over the last four decades. A comparable portfolio containing no equity REITs yielded 10 percent with a higher risk exposure. 

Analysts at Morningstar found that annual REIT growth has averaged 6.2 percent since 1990, outpacing inflation in all but four of the last 21 years. REIT dividend yields have been on average 1.2 percent high than the average 10-year Treasury yield for the same period.

Affluent investors, who tend to pay close attention to investment risk and diversification, are more likely to invest in a REIT than investors at lower wealth levels, according to Millionaire Corner research. About 14 percent of investors with $100,000 to $1 million have REITs, compared to 44 percent of investors with up to $25 million in investable assets. 

 Though a REIT offers many advantages to income-starved investors, the products do carry some risks. Further declines in commercial property values and rising interest rates are two of the possible headwinds for REITs.

 REITs were created by the 1960s by federal legislation aiming to provide individual investors access to commercial real estate markets. A REIT is a corporation that invests solely in real estate and is bound by special IRS rules. REIT income is exempt from corporate taxes, but 90 percent of it must be distributed as income to shareholders. Due to its unique structure a REIT can provide investors an income stream, as well as long-term growth.