Alternative Investments: The Shift To Real Estate

Financial advisers are shying away from the traditional 60-40 allocation model for their clients’ portfolios. (60% stocks, 40% bonds.) According to a new survey, they want a new structuring method to maintain returns and balance risk.

InvesmentNews said that about 40% of the 163 advisers who responded to the survey said that they don’t believe that the strategy is ideal for achieving performance and managing risk. Barely 20% of advisers even think that it is the best method.

Neal Frankle of Wealth Resources Group said that the 60-40 method can’t be used like it has for the past 30 years. He uses it now with a dynamic combination of stocks short- to mid-term bonds.

The biggest shift that he’s made is an allocation toward real estate. He said, “Real estate, for the right client, is the right place now because prices are low and it can produce an income stream.”

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Indeed, one increasingly preferred method or portfolio diversification is real estate. A house, a hotel, an office building, etc. But not all of us can afford to buy an entire piece of real estate, so the next best thing is REITs.

As defined by Investopedia, REITs, or Real estate Investment Trusts, are securities that sell like a stock on the major exchanges and invests in real estate directly, either through properties or mortgages. REITs receive special tax considerations and typically offer investors high yields, as well as a highly liquid method of investing in real estate.

There are many REITs available on the exchanges. To provide you with a starting point, we list below the highest performing REITs year-to-date. Will they continue their success?

List sorted by performance.

Interactive Chart: Use the Compar-O-Matic to compare analyst ratings for the stocks mentioned below:

1. Newcastle Investment Corp. (NCT, Earnings, Analysts, Financials): Operates as a real estate investment and finance company that invests in and manages a portfolio consisting primarily of real estate securities. Market cap at $682.62M, most recent closing price at $6.65. The stock has gained 43.90% year-to-date.

2. FelCor Lodging Trust Inc. (FCH, Earnings, Analysts, Financials): Operates as a lodging real estate investment trust (REIT) primarily in the United States. Market cap at $529.04M, most recent closing price at $4.46. The stock has gained 39.67% year-to-date.

3. CoreSite Realty Corporation (COR, Earnings, Analysts, Financials): Operates as real investment trust in the United States. Market cap at $489.94M, most recent closing price at $24.56. The stock has gained 34.93% year-to-date.

4. The Howard Hughes Corporation (HHC, Earnings, Analysts, Financials): Is a real estate investment and development company, engaging in managing, developing, and leasing commercial, residential, and mixed-use real estate. Market cap at $2.21B, most recent closing price at $60.58. The stock has gained 31.70% year-to-date.

5. American Capital Mortgage Investment Corp (MTGE, Earnings, Analysts, Financials): Market cap at $512.2M, most recent closing price at $23.63. The stock has gained 28.56% year-to-date.

6. Apollo Residential Mortgage, Inc. (AMTG, Earnings, Analysts, Financials): Market cap at $188.61M, most recent closing price at $18.81. The stock has gained 25.24% year-to-date.

7. Pennsylvania Real Estate Investment Trust (PEI, Earnings, Analysts, Financials): Is a publicly owned equity real estate investment trust. Market cap at $715.08M, most recent closing price at $13.47. The stock has gained 23.84% year-to-date.

8. Apollo Commercial Real Estate Finance, Inc. (ARI, Earnings, Analysts, Financials): Operates as a commercial real estate finance company in the United States. Market cap at $329.74M, most recent closing price at $16.05. The stock has gained 23.36% year-to-date.

9. Sunstone Hotel Investors Inc. (SHO, Earnings, Analysts, Financials): Operates as a real estate investment trust. Market cap at $1.19B, most recent closing price at $10.36. The stock has gained 22.58% year-to-date.

10. Brandywine Realty Trust (BDN, Earnings, Analysts, Financials): Is a publicly owned real estate investment firm. Market cap at $1.61B, most recent closing price at $11.43. The stock has gained 22.10% year-to-date.

(Written by Danny Guttridge)

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