ETFs real estate, are they a good investment?

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With real estate ETFs you can invest in one of the most important global markets in the world: real estate investments offer ample possibilities and relatively few risks.

etf real estate

A very important and interesting investment is that in ETF real estate. Since ancient times, real estate has been one of the most important investment classes, if not the most important: before the birth of companies, stock exchanges, funds and bonds, real estate investment was one of the best ways to invest and increase your assets.

Even today, in countries where the financial market is underdeveloped, those who are able to save generally do so in the real estate market, while in the richest countries a large portion of investment flows has always ended in real estate.

What are real estate ETFs

A real estate ETF invests in shares of companies that own properties. Therefore mainly companies that raise capital on the market (and / or reinvest the profits) and use them to acquire residential complexes, shopping centers, offices and business centers, properties rented to large multinationals or public / government bodies, residences for the elderly and / or residences sanitary, etc …

These companies collect the rents, pay the running costs (of the properties and the company) and then generally distribute the profits as dividends. Indeed, in the USA and other countries these companies distribute all the profits because, organized in the form of “Real Estate Investments Trusts“, they have a tax benefit deriving from distribution.

The result, therefore, is that real estate ETFs collect high coupons and, consequently, often turn these coupons to investors. It is no coincidence, therefore, that these ETFs are often the ones with the most attractive dividends among equities.

The advantages of investing in real estate ETFs

The result is that a real estate ETF is often attractive to a dividend-seeking investor. Especially when interests in the bond sector are low.

The advantages of real estate ETFs can be summarized as follows:

  • a real estate ETF can have an excellent diversification both nationally, regionally or internationally, which for an individual investor, even wealthy, may not be so easy.
  • economics of scale in the management of real estate assets (carried out indirectly by investee companies).
  • the investee companies have a higher debt capacity than a single investor.
  • diversification by segment is easier (directional, residential, commercial, etc …)

The elements for evaluating ETFs are the usual ones, i.e. costs, fund size, returns and index replication methods.

The choice to invest in real estate ETF also depends on the geographical objective: there are ETF real estate Europe, ETF real estate USA, others investing in Asia, others still diversified. My advice, however, is to select global real estate ETFs. This is because in this way there will be good exposure to the various international areas, isolating local crises.

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