REIT Performance vs. Equity Market Performance (as of 03/31/2008)
Chart of the Week for April 25 - May 1, 2008
Real Estate Investment Trusts ("REIT") are investment vehicles with holdings generally related to the real estate markets, such as mortgages, equities in real estate related companies, shopping centers, office buildings and hotels. REIT's employ a variety of strategies and vary in their level of diversification. Historically, some investors have used REITs to obtain exposure to the real estate sector and possibly hedge against inflation. Also, REIT popularity over the last few years has been influenced by their strong performance, as measured by the S&P REIT Index, relative to the equity market, as measured by the S&P 500 Index.
After a difficult 2007, REITs, as measured by the S&P REIT Index, posted positive returns in the first quarter of 2008. The sharp drop in 2007 broke a seven year streak of out performance for the S&P REIT Index relative to the S&P 500 Index.
Several factors may be influencing REITs. A cooling housing market is having a negative impact on the value of some properties. Home affordability concerns may possibly be increasing demand for apartments which could benefit REITs tied to apartment buildings. Further, weak labor markets and tightened credit markets may hurt retail and office REITs.
As with other asset classes and the markets in general, timing the real estate market well is difficult for many investors. A well diversified portfolio coupled with an appropriate time horizon and strategy has served many investors better than attempting to time the markets or asset classes.
This illustration was compiled by information from outside sources. These companies are not affiliated with ICMA-RC. This information is being provided for educational purposes and is not intended to be construed as or relied upon as investment advice. ICMA-RC does not offer specific tax or legal advice. Individuals are advised to consider any new investment strategies carefully prior to implementing.
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The performance data quoted represents past performance. Past performance is no guarantee of future results. Investment returns and principal value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data illustrated. For performance data current to the most recent month end, contact ICMA-RC Services, LLC by calling 1-800-669-7400 or by writing to 777 North Capitol Street, NE, Washington, DC 20002-4240. Para asistencia en Español llame al 1-800-669-8216. Performance data current to the most recent quarter end is available by visiting www.icmarc.org.