Stocks Can Make You Rich – but Could REITs Make You Richer?

I love real estate.

And I love it for one good reason.

Outside of owning a successful business, the top way to get rich is investing in real estate.

Most of us will never be real estate developers, but thanks to the miracle of REITs, we can own all sorts of solid real estate investments. We can own skyscrapers, warehouses, cell towers, apartment buildings, and just about any type of property we wish.

And here's the best part about it: We never even need to speak to a real estate agent.

With the click of a mouse, we can become an owner of farms, senior living facilities, and even medical cannabis facilities.

So today, I want to take a deep dive into how you can make a ton of money investing in REITs as opposed to stocks.

And I'll even reveal how you could have made $385,000 more if you had invested in them over a long period of time.

According to Research, REITs Outperform Stocks in the Long Term

We are always told that we should own stocks because they offer the highest returns.

I believed that for a long time. But the truth is that REITs outperform stocks over the long run with less volatility, according to several studies I have read over the years.

When I sat down to write this, I checked the National Association of Real Estate Investment Trust data, and I calculated that owning equity REITs since 1980 has provided a return of 11.61% a year. Owning the S&P 500 during that same time frame has compounded at just 8.39%

An investor who put $10,000 in the widely touted index fund would have a little over $197,000 at the start of 2018. The REIT investor who took the far more boring path would have more than $582,000 in their account. Following conventional Wall Street wisdom would have cost our now senior citizen investor $385,000!

While I will continue to adore stocks as well – it's a pretty close race, and long-term investment of both will make you money – history tells us REITs will make us more.

Your Independent How-To Guide: Planting the Seed of Prosperity During an Economic Crisis

Yet, despite this overwhelming evidence in favor of REITs, people will continue to tell us it's a bad idea to buy them when interest rates are rising. Your broker said so, and that guy on TV said so. They say that REITs are horrible investments in high-interest-rate environments.

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Everyone also "knows" that Abner Doubleday invented baseball, that pilgrims always wore black, and that detox diets are good science. But none of that is true.

By the same token, it's not true that REITs do poorly when rates are rising.

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In fact, a recent research piece from Cohen and Steers, a leading real estate investment firm, confirmed the opposite is true.

Here are four scenarios laid out by that report:

Scenario No. 1: When the economy is growing faster than usual and rates are increasing, REITs do better. Rates usually rise when the economy is growing. During high-growth, high-interest-rate periods since 1981, REITs have averaged 12.5% a year, while stocks have managed just 1.7%. For those of you keeping score at home, that's almost 7.5 times what stock investors earned.

Scenario No. 2: When the economy was growing fast and rates were falling, REITs soared by 25.3%, and stocks returned 11.2% in this economic nirvana scenario.

Scenario No. 3: When rates were falling and growth was slowing, REITs averaged 14.6% and stocks averaged just 1.2%. REITs in this scenario returned more than 12 times as much as stocks!

Scenario No. 4: When rates are rising and growth is slowing, REITs do not do very well. They lost about 2.7%. That's not fantastic, but it's still more than the stock market, which fell by an average of 9.3%.

REITs Just Do Better – and That's Even Without Our Sabermetric Approach...

The truth is that the earliest mention of baseball in America was in a diary entry from Princeton student John Rhea Smith, 25 years before Mr. Doubleday was born, and that REITs do very well unless rates are rising and growth is slowing.

You can do pretty well just owning the indexes. However, in just about every imaginable scenario, owning REITs turns out better than the owning the stock market indexes.

I did a quick and dirty back test since the end of 2009, when the credit crisis began to ease. I found that owning all REITs has returned about 12.66% a year.

However, I then looked at buying just those REITs flagged a "buy" using my Sabermetric approach – given that they traded for less than their asset value – and the annual return increased to 14.56%.

As much as I love REITs, I love quality REITs at bargain prices even more.

Right now, we are finding bargain REITs with high-quality portfolios full of apartment buildings, office properties, farms, shopping centers, hotels, self-storage facilities, and single-family rental homes that might qualify as Heatseekers.

If you're not a member of our exclusive Heatseekers service, which gives you access to top-dollar real estate picks as well as three other categories of investment opportunities, click here to join.

Should the markets decide to sell off some more, there will be more on my list.

Real estate driven by intelligent numbers makes money.

I like money. Therefore, I love real estate.

It's just math, really.

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It sounds contradictory…

But all you need are the right tools – and the uncensored truth the mainstream media doesn’t want you to know.

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Go here for the full story.

The post How You Could Have Made $385,000 More Investing in REITs Over Stocks appeared first on Max Wealth.

About the Author

Tim Melvin is an unlikely investment expert by any measure. Raised in the "projects" of Baltimore by a single mother, he never attended college and started out as a door-to-door vacuum salesman. But he knew the real money was in the stock market, so he set sights on investing - and by sheer force of determination, he eventually became a financial advisor to millionaires. Today, after 30 years of managing money for some of the wealthiest people in the world, he draws on his experience to help investors find "unreasonably good" bargain stocks, multiply profits, and build their nest eggs. Tim tirelessly works to find overlooked "hidden gems" in the stock market, drawing on the research of legendary investors like Benjamin Graham, Walter Schloss, and Marty Whitman. He has written and lectured extensively on the markets, with work appearing on Benzinga, Real Money, Daily Speculations, and more. He has published several books in the "Little Book of" Investment Series and a "Junior Chamber Course" geared towards young adults that teaches Graham's principles and techniques to a new generation of investors. Today, he serves as the Special Situations Strategist at Money Morning and the editor of Peak Yield Investor.

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