REIT
What is a REIT anyway? A REIT is an investment trust that purchases owns or manages real estate or real estate loans (or a combination of the two). A REIT has liquidity and the ability for investors to evaluate portfolio assets (much like a mutual fund) to determine whether the REIT is a good or bad investment.
As of 2007, the REIT index was down 14% due to the current mortgage crisis, while home values plummeted 11%. But in the specialty market, timberland (trees, wood, timber, and the land that grows trees) have taken an entirely different direction than traditional real estate and the home mortgage market. Historically, timber investments do not correlate to other asset classes, but moves positively in the direction of inflation (which is going up)…a true inflation hedge. Timber investments have beaten the S&P 500 index over the past 20 years with less volatility, but were only available to the rich, until the timber REIT surfaced several years ago.
The timber REIT has consistent cash flow, and the dividend is a capital gain (rather than ordinary income). The specialty REIT sector (which is primarily timber REITs) was up 15% as of the end of 2007.
What does this mean to you the investor? This means you should evaluate the pros & cons of investing in timber REIT’s carefully before investing with your broker. There is several different timber REIT’s…so analyze the prospectus & market sector carefully. If you invest, diversify your positions, and evaluate your liquidity to fight volatility with future market cycles.
Sincerely,
John Bagwell
The Truth About Financial Products.com
www.thetruthaboutfinancialproducts.com
