by EightFolding
What are your favourite Equity REITs? Are any of them performing well at the moment?
I had been avoiding real estate because as a sector it’s doing so badly. But I was interested to read this analysis that talks about how Equity REITs do almost as well as the Energy sector during inflationary periods (but avoid mortgage REITs!). The article has a great chart to see sector performance visually as well.
“Although equities in general have performed quite poorly in high and rising inflation environments, there are potential areas that have historically performed better at the sector level. The energy sector, which includes oil and gas companies, is one of them. Such firms beat inflation 71% of the time and delivered an annual real return of 9.0% per year on average.
This is a fairly intuitive result. The revenues of energy stocks are naturally tied to energy prices, a key component of inflation indices. So by definition generally have performed well when inflation rises.
Equity REITs (real-estate investment trusts) may also help mitigate the impact of rising inflation. They outperformed inflation 67% of the time and posted an average real return of 4.7%. This makes sense too. Equity REITs own real-estate assets and may provide a partial inflation hedge via the pass-through of price increases in rental contracts and property prices.
In contrast, mortgage REITs, which invest in mortgages, are among the worst-performing sectors. Just like bonds, their coupon payments generally become less valuable as inflation increases, sending their yields higher and prices lower to compensate.”
Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence or consult your financial professional before making any investment decision.