Real assets have been a prime way to hedge against rising inflation, and that should continue for some time, as more rate hikes are expected throughout the year.
“With inflation reaching levels not seen in decades, real estate remains an attractive investment option,” a Realty Biz News article says. “Inflation has been a top concern for investors for several months and it doesn’t look to be going away any time soon. Real estate has always been a strong alternative to the stock market when inflation kicks in.”
Even as rising rates lead to more expensive borrowing costs via mortgages, this shouldn’t affect real estate in the long term. Economic fundamentals of scarcity and localized demand should help prop up the overall market.
“No one is creating any new raw land. Real estate is always local, which is why land values vary dramatically between urban and rural settings,” the article adds. “Inflationary prices will be sustained particularly in dense, urban neighborhoods, where there is a limited supply of properties, and a lack of available land to build new structures on. This is good news for current property owners, as demand for real estate does not generally decrease, even when inflation rises.”
The Global Real Estate Market in One Fund
Investors don’t have to take on multiple real estate stock positions or hold actual property. They can get the global real estate market in one exchange traded fund (ETF) through the FlexShares Global Quality Real Estate Index Fund (GQRE ).
Per the fund description, GQRE seeks investment results that generally correspond to the price and yield performance of the Northern Trust Global Quality Real Estate Index. The index is designed to reflect the performance of a selection of companies that, in aggregate, possess greater exposure to quality, value, and momentum factors relative to the Northern Trust Global Real Estate Index.
While most of its holdings reside in the U.S., investors get that global twist with holdings from other countries. That list includes Japan, Australia, Hong Kong, and Canada.
“Investing in the real estate sector offers the potential to add growth, diversification, income along with potential protection against the risk of long-term inflation to a portfolio,” the FlexShares Fund Focus article says. “We believe that a well-diversified and global approach to real estate investing is a key factor in unlocking the full range of these potential benefits.”
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