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4 Real Estate Funds For A Stable Portfolio

By Zacks Investment ResearchStock MarketsJun 20, 2019 11:26PM ET
www.investing.com/analysis/4-real-estate-funds-for-a-stable-portfolio-200433667
4 Real Estate Funds For A Stable Portfolio
By Zacks Investment Research   |  Jun 20, 2019 11:26PM ET
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Per the latest report, U.S. building permits for the month of May surpassed its previous month figures to point toward strength in the housing space. Lately, there has been widespread speculation regarding a slowdown in the space. However, taking a closer look at the current scenario, the housing industry is actually reeling under extreme paucity of skilled labor amid rising prices of materials.

But such factors are only momentary impediments. Furthermore, a hiring boom in construction is another positive sign for the sector. Under such circumstances, investing in real estate mutual funds seems prudent.

Building Permits Remain Robust

Per the latest joint report by U.S. Census Bureau and the U.S. Department of Housing and Urban Development on Jun 18, building permits for the month of May rose to approximately 1.3 million units. This is slightly better than April’s 1,290,000 units.

Privately owned authorizations rose to 1,294,000 in the month. Meanwhile, single-family building authorizations rose to 815,000, higher than 786,000 in the previous month. Moreover, authorizations for buildings having five or more units came in at 442,000 units. Such healthy numbers, the analysts believe, point to robust growth for the housing sector in the days to come.

Investor Dry Powder to Boost U.S. Real Estate

A lot of proptech startups aiming to tap the real estate market have been established lately. Such startups assist real estate companies by improving the transaction process, easing the hassles involved with construction and providing newer methods of financing real estate projects. The crowdfunding legislations in 2012 and 2015 provided the required stimulus for the growth of these startups.

Talking about real estate funding, venture capitalist and private equity investors had poured in about $5.2 billion in real estate startups by the end of 2018. Moreover, angel investors are interested now, more than ever, to tap the space by investing liquid cash in real estate startups. As a matter of fact, approximately $226 billion is expected to be invested in real estate in 2019.

4 Best Fund Picks

Given such circumstances, we have highlighted four real estate mutual funds that are poised to gain from such factors. These funds also carry a Zacks Mutual Fund Rank #1 (Strong Buy) or #2 (Buy). Moreover, these funds have encouraging three and five-year returns. Additionally, the minimum initial investment is within $5000.

We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.

The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

Prudential (LON:PRU) Global Real Estate A PURAX fund seeks income and capital growth. The fund invests heavily in equity securities of real estate companies as well as real estate investment trusts (REITs) and other real estate securities.

This Sector – Real Estate product has a history of positive total returns for over 10 years. Specifically, the fund's returns over the three and five-year benchmarks are 9% and 9.1%, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

PURAXhas a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.18%, which is below the category average of 1.23%.

John Hancock II Real Estate Securities 1 JIREX fund seeks appreciation of capital and income over the long term. JIREX invests primarily in equity securities of companies engaged in operations related to the real estate sector, which includes REITs. The fund invests in securities including common stocks, preferred stocks and convertible securities. It may invest a maximum of 10% of its assets in securities of companies domiciled outside the U.S. territory.

This Sector – Real Estate product has a history of positive total returns for over 10 years. Specifically, the fund's returns over the three and five-year benchmarks are 6.8% and 8.3%, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

JIREX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.80%, which is below the category average of 1.22%.

Fidelity Real Estate Investment Portfolio FRESX fund aims for long-term capital appreciation and above-average income that is consistent with reasonable investment risk. The non-diversified fund mostly invests in common stocks. FRESX invests the majority of its assets (up to 80%) in securities of companies that are engaged in the real estate industry and other investments related to real estate.

This Sector – Real Estate product has a history of positive total returns for over 10 years. Specifically, the fund's returns over the three and five-year benchmarks are 5.9% and 8.2%, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

FRESX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.76%, which is below the category average of 1.22%.

Davis Real Estate Fund Class A RPFRX aims for total return through a combination of income and growth. The fund’s adviser applies the Davis Investment Discipline to invest the majority of its assets in securities issued by companies operating in the real estate industry. RPFRXmostly invests in common stocks of U.S.-based companies and even in non-U.S. companies.

This Sector – Real Estate product has a history of positive total returns for over 10 years. Specifically, the fund's returns over the three and five-year benchmarks are 7.5% and 8.7%, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

RPFRXhas a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.97%, which is below the category average of 1.22%.

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4 Real Estate Funds For A Stable Portfolio
 

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4 Real Estate Funds For A Stable Portfolio

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