Jorgen Vik: Real estate investment trusts can diversify portfolios | Lifestyles

Real Estate Investment Trusts (REITs) are often overlooked by investors. That’s too bad; They can be a great way to diversify a stock portfolio.

REITs are considered to be one of the 11 major sectors of the stock market. Other sectors are technology, energy and industry.

You can measure the diversification of your stock portfolio by measuring how much you’ve allocated to each of the 11 sectors. The idea is that the sectors may not move in unison, and so you can reduce the highs and lows compared to a lot in just a sector or two.

REITs are commercial real estate and therefore very different from your personal residence.

I know some investors fear that post-pandemic REITs will suffer as office buildings stand empty and workers sign up from home.

This certainly seemed to be part of what led REITs to high losses in the early stages of the pandemic. But those who sold REITs back then and stayed out will have missed the rebound. According to Fidelity, the REIT sector has returned 18.5% year-to-date, while the S&P 500 has returned 11.5% overall.

And remember, REITs are much more than just office buildings. REITs can be companies that operate warehouses, medical facilities, apartment complexes – or even companies that operate cell towers.