In the years after the recession, income seekers were facing a big quandary. As the Federal Reserve kept interest rates at zero, normal income-producing asset classes such as CDs, money markets and Treasury bonds paid paltry yields. To find more income, investors were forced to look elsewhere and one of the prime spots were real estate investment trusts (REITs). And thanks to the ETF boom, REIT ETFs became some of the largest gatherers of assets around.
But lately, REIT ETFs haven’t exactly been on fire and some investors are now questioning the role they play in their portfolios.
The reality is, REIT ETFs are not bond proxies. Yes, they pay dividends, but they are more about total returns and are actually better gauges of economic health rather than pure yield. It could be time to seriously reimagine how you use REIT ETFs in your portfolio.
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