Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Time for Income-Starved Investors to Reconsider REITs?

Companies / Housing Stocks Aug 25, 2013 - 04:29 PM GMT

By: DailyGainsLetter

Companies

John Paul Whitefoot writes: After a serious pullback in May, is it time for income-starved investors to reconsider real estate investment trusts (REITs)? Or will America’s favorite sugar daddy, Federal Reserve Chairman Ben Bernanke, tease investors with ongoing threats of tapering?

The North American REIT bull market was stopped dead in its tracks on May 22, after Bernanke hinted the central bank might begin tapering its massive $85.0-billion-per-month government bond-buying program.


By being the major purchaser of U.S. government bonds, the Federal Reserve has been able to keep interest rates artificially low. Tapering its bond-buying program would mean, in theory, that interest rates head higher. In an effort to protect their retirement portfolio, investors are selling stocks they see as being vulnerable to rising interest rates.

REITs are at the top of the list. That’s because REITs are in the business of purchasing property and higher interest rates on the heels of financing translates into lower profitability.

While artificially low interest rates are a godsend to REITs, they’re a nightmare for average Americans looking to generate retirement income on their long-term bonds.

Interestingly, since May and the ensuing market volatility, the Federal Reserve has said that inevitable tapering would not necessarily result in higher interest rates. That’s more good news for REITs—and more bad news for income-dependent investors.

Unfortunately, many REITs have failed to fully recover from the Federal Reserve’s May 22 comments. Those depressed prices have opened up a door of opportunity for savvy investors. That’s because, when prices for REITs (and dividend stocks) fall, yields rise. The volatility means investors can pick up quality REITs at depressed prices with higher returns.

REIT volatility could diminish in the short term, as fears of looming higher interest rates fade. After all, the chances of the Federal Reserve hiking interest rates in a climate of high unemployment and weak overall economic growth are virtually nil.

For investors looking to generate income and capital appreciation, REITs are more attractive now than they were in the spring—not just because they’re cheaper, but because their yields are, by extension, higher.

After climbing more than 17% between January and May 22, the SPDR Dow Jones REIT (NYSEArca/RWR) has lost 15% of its value and more than erased all of the year-to-date gains.

Between January and May 22, iShares Cohen & Steers Realty Majors (NYSEArca/ICF) climbed more than 16%; since then, however, it has lost 15% of its value and is trading at levels not seen since December 2012.

While some investors may be staying away from REITs, the current entry-level prices, yields, and outlook make them an attractive option.

Source: http://www.dailygainsletter.com/real-estate/time-for-income-starved-investors-to-reconsider-reits/1422/

Author Bio: John Whitefoot, BA, is an Editor at Lombardi Financial specializing in low-priced investment opportunities. Prior to joining Lombardi, John worked for eight years as the Senior Financial Editor of a leading online financial newsletter. Through his career, John has profiled over 1,000 low-priced stocks researching and covering numerous sectors including healthcare, media, manufacturing, IT, education, hospitality, natural resources, and retail. He's primarily a fundamental analyst who focuses on "off radar" situations with big upside potential for the individual investor. Add John Whitefoot to your Google+ circles

© 2013 Copyright Daily Gains Letter - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in