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Mutual funds that invest in real estate

Updated on August 20, 2015

Real estate investing through mutual funds

When most people think of investing in real estate they think of homes apartments, even vacant land, most people do not think of owning it in their 401K. A good percentage of Americans do invest in real estate they own homes.

Most Americans are not only investing in their homes they are highly leveraged. Most people are carrying mortgages on their home near or even above their homes value. Some people do not realize it but they already have quite an investment in real estate.

I am not normally an investor in real estate funds because of home ownership. I believe very strongly in diversity of assets. I am also a contrarian investor who believes the time to buy is when seemingly every one is selling. As I drive around I see empty homes by the score, empty store fronts, and closed factories. Many homes are selling at values they sold at 25 years ago. In the middle of economic despair is it time to invest in real estate?  

Buying a home at a low price, fixing it up and renting it out can be a very nice way to produce an income stream. This has worked for a number of investors but how many investments call you up at three in the morning and tell you the toilet is overflowing?

Buying vacant land can be a great investment however the investor is still going to need to pay taxes on the property.

Grow your investments

Real estate can be a fine investment!
Real estate can be a fine investment!

Mutual funds that invest in real estate

While there are a lot of very effective ways to make money on real estate, the balance of this article is about mutual funds which invest in real estate. There are several types of mutual funds which invest in real estate.

Traditional open end mutual funds

There are a number of open end mutual funds which invest in real estate. One can google “real estate funds” and find a host of funds investing in real estate. One fund I would like to look at is the CGM Realty fund symbol CGMRX. This fund has gained 19.32 percent per year over the past ten years and gained over 34 percent in 2009. This fund invests primarily in Real Estate Investment Trusts also known by the acronym REITS. This five star rated fund may well be a good addition to your portfolio.

Looking at the fund picks from Fidelity for real estate mutual funds only two funds show up. Guess what they are both Fidelity funds! The Fidelity Real Estate Income Fund symbol FRIFX is a five star rated fund. This fund is more diversified than the CGM fund and invests in convertible bonds, preferred stocks as well as bonds in addition to Real Estate Investment Trusts. This fund was up almost 46 percent in 2009.

Exchange Traded Funds

There are a host of Exchange Traded Funds investing in real estate.

A list includes:

Fund symbol RWX. This fund seeks to replicate the price and yield performance of Dow Jones Global ex-US Select Real Estate Securities index.

Fund symbol IYR. This fund is the same as RWX but for United States market.

Fund symbol VNQ. This fund trades as a basket of Real Estate Investment Trusts.

Fund symbol DRN. This fund seeks to move up or down at a rate three times the MSCI US REIT Index.

There are many more Exchange Traded Funds investing in the real estate area, do your homework and find one right for you if you choose to invest in this area.

Closed end funds

Lastly I want to mention closed end funds. There are a number of closed end funds which are real estate investment vehicles. The Cohen & Steers REIT & Preferred Income Fund symbol RNP invests in a mix of Real Estate Investment Trusts and bonds. This fund was up 91 percent in 2009. I own this fund and and have been pleased with it. The Cohen & Steers REIT & Preferred Income Fund pays a nice quarterly dividend for those of you wishing to develop an income stream.

As with Exchange Traded Funds there are many closed end funds in the real estate arena.

There are many ways to invest in the real estate market more than could be covered here. Wise real estate investing has the potential to yield very handsome returns in the coming years.

Regardless if you investing in your IRA, 401K or outside of a retirement vehicle choose your investments wisely. Keep a good asset allocation in your portfolio. When investing in mutual funds invest in the best funds available.


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