REITs: A Most Diversifying Investment

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Now, a portfolio, like a perfectly tailored suit, requires a certain… completeness. One simply must have a bit of everything, you see. A dash of this, a smattering of that, and, of late, the financial advisors – a rather sensible bunch, on the whole – have been urging upon us the inclusion of Real Estate Investment Trusts, or REITs as they’re known in the more rapid circles. It seems that diversifying one’s holdings with a bit of brick and mortar—or, rather, the income from brick and mortar—is considered a thoroughly good show.

Allow me to present a pair of options, guaranteed to add a certain… robustness to even the most delicately balanced investment scheme. We shall begin with a particularly solid citizen of the corporate world, and then move on to a broader approach, suitable for those who prefer a wider net.

Realty Income: A Most Dependable Chap

Realty Income, or “O” as it’s known on the ticker tape, is, if I may say so, the very epitome of a well-run REIT. It’s a firm built on the solid foundation of over fifteen thousand five hundred properties, leased to a staggering number of tenants – nearly sixteen hundred, in fact! These aren’t just any tenants, mind you, but businesses spanning ninety-two different industries. A truly impressive spread, what?

The secret to their success lies in long-term net leases. This means the tenants, bless their responsible hearts, cover all the operating costs – maintenance, taxes, insurance, the whole shebang. It’s a remarkably predictable arrangement, ensuring a steady stream of income that would make even the most cautious accountant smile. And a strong financial profile, with a credit rating that would make a banker positively beam, doesn’t hurt either. It allows them to continue investing even when the market throws a bit of a wobbly.

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The result of this sensible approach? A monthly dividend that’s remarkably attractive, and a history of increasing that dividend for a truly astonishing one hundred and thirteen consecutive quarters! Since their public listing back in 1994, they’ve delivered a compound annual total return of 13.7%. A most satisfactory performance, wouldn’t you agree? It’s the sort of thing that makes one feel decidedly optimistic about the future.

Schwab U.S. REIT ETF: A Broad Sweep of the Board

Now, for those who prefer a slightly wider perspective, the Schwab U.S. REIT ETF – or “SCHH” to those in the know – offers a delightfully convenient solution. It invests exclusively in REITs that own commercial real estate, neatly sidestepping the more… speculative mortgage REITs. And the expense ratio? A mere 0.07%! It’s practically giving money away, the sensible chaps at Schwab.

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While the fund holds over one hundred and twenty REITs, it does lean rather heavily on the larger players. Realty Income, in fact, accounts for 4.2% of its assets, making it the sixth-largest holding. However, it still provides a commendable level of diversification, with healthcare REITs leading the charge at 16.6% of the holdings. A sensible spread, ensuring that one isn’t overly reliant on any single sector.

And, of course, it generates passive income – a trailing twelve-month dividend yield of 3%. While the distributions have fluctuated over the years, the payout has generally trended upwards, as the underlying REITs increase their dividends. A most pleasing development, wouldn’t you say?

Two Paths to a More Robust Portfolio

Realty Income, then, is a splendid choice for those seeking a reliable income stream and a direct investment in the sector. The Schwab U.S. REIT ETF, meanwhile, offers the same benefits with the added advantage of broader diversification. Either option, I submit, would be a thoroughly good show, and a most sensible addition to any well-balanced portfolio. One simply can’t have too much diversification, you know. It’s the key to a peaceful and prosperous financial future.

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2026-01-20 19:12