The formula for getting rich is pretty simple: Generate higher returns in the shortest time frame possible without taking risks that can decimate a portfolio.
Over a long period of time, gaining a few percentage points per year in one asset class over another is a really big deal.
Compound returns are the difference between success and failure as an investor.
Since 1980, Real Estate Investment Trusts (REITs) have generated annualized returns of 11.61%, compared to just 8.39% for the S&P 500.
In dollar terms, $10,000 invested in REITs resulted in a windfall of nearly $400,000.
What could you do with an extra $400,000?
Quite a bit I suspect.
The real kicker is when you consider that many investment professionals expect the S&P 500 to yield in the low single digits for the foreseeable future.
Even if REIT returns yield below the historical average in the near term, it will still be ahead of the stock market.
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And what happens if the stock market has entered a long-term bear market?
Then, as many say, the place to protect capital will be real estate and, by default, REITs.
With a plethora of REITs trading in the market today, there are no shortages of choices for investors looking for exposure in the space.
Perfect enough, the Money Morning Stock VQScore™ just alerted us to three REITs that recently earned our highest rating.
These are the three best REITs you can buy today...
The Best REITs to Buy Now: No. 3
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Rising interest rates might be putting pressure on the stock market and homebuilding, but it's a godsend for the apartment business.
Higher mortgage rates mean fewer buyers and more people renting.
Apartment Investment and Management Co. (NYSE: AIV) is one of the largest apartment REITs in the market, with some 133 communities in 17 states.
That's a lot of coverage and diversification should there be issues in any particular market.
Over the last six months, shares of AIV have done quite well, gaining almost 10%.
Add in a dividend yield of more than 3%, and you have a stock that can turbocharge your portfolio.
Considering the carnage in the rest of the market, such a safe haven is rare.
With mortgage rates on the uptick, the cash flow from rents should continue to be strong in the near term.
The market recognizes that bright future.
On days when the market gyrates down 2% or 3%, AIV merely takes a fractional step lower.
Downside protection with solid returns on the upside is why AIV is rated so highly by the VQScore.
The Best REITs to Buy Now: No. 2
In any market, there are places to safely invest. You just need to know where to find them.
The market is concerned about a deflationary spiral and recession, but the economy is doing just fine, as evidenced by the strength of the job market.
Wages are finally improving, and that means more money to spend on discretionary items, things that are wants and not needs - including travel.
More travel means more hotel rooms will be filled, and hotel REITs should outperform.
Sunstone Hotel Investors Inc. (NYSE: SHO) is a mid-cap REIT with 22 hotels and more than 10,000 rooms under major hotel brands like Hyatt, Marriott, and Hilton.
Those brands alone offer protection should the economy stumble in the near term.
Unfortunately, market worries about the economy have trumped the strength in future discretionary spending.
Shares of SHO have taken a step back during the market correction. Still, the losses have not been as large as in other segments of the market.
With the stock down approximately 15% over the last six months, investors are getting a high VQScore stock at a discount.
As long as the job market stays strong, this hotel REIT should offer great protection and solid appreciation in excess of major market index returns.
The Best REITs to Buy Now: No. 1
Investors Real Estate Trust (NYSE: IRET) is a small, Midwest REIT operating in the apartment segment that is positioned to do well no matter what transpires in the overall economy.
In the current market environment, most small-cap stocks are nearing or are in bear market territory, down more than 20%.
IRET is down only 10% in the last six months.
Its beta, a measurement of risk relative to how a stock moves compared to a major market index, is low at 1.32 - and for good reason.
Funds from operations at $203 million represents 223% of its gross profits. Analysts view such a number as meaning its earnings are strong and of high quality.
That is typically not the case for most small-cap stocks.
For IRET then, we have a low beta stock with high-quality earnings trading for just over $5 today.
Appreciation from that base could reach 50% or more in short order.
Imagine what could happen if the market cooperates.
Up or down, IRET and its high VQScore make it a stock to own immediately.
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