Real estate is a reliable asset class commonly found in diversified investment portfolios. While real estate mutual funds don’t lead in price appreciation or income generation among Morningstar fund categories, they provide an excellent balance of both over time.
Currently, the real estate fund category’s average dividend yield is 3.21%. That’s more than double the 1.32% dividend yield cranked out by the broad stock market, represented by the Vanguard 500 Index Fund Admiral share class (VFIAX), a popular proxy for the widely followed S&P 500 Index.
However, the real estate fund category also boasts a 4.99% average annual return over the past 10 years versus 12.69% for the S&P 500. This is despite the real estate category topping such rival groups as natural resources, which includes red-hot energy stocks. Real estate funds also beat high-yield bond funds and target-date retirement funds.
Many no-load real estate mutual funds are available only through a retirement plan, brokerage or financial advisor. Still, you can often access their class A-shares on your own for a slightly higher cost and fractionally lower returns.
All of our funds’ returns equal or beat their Morningstar category averages over the past 10 years, and all but one sport below-average fees. The one outlier is just a few basis points above average.
Investors who like regular dividend payments as part of a decent total return will enjoy shopping from our list of varied, top real estate mutual funds from a range of providers.