Real Estate Investment Trusts (REITs)

Real estate investments trusts (REITs) are mutual funds that invest in real estate through actual property and/or mortgage portfolios. These types of investment vehicles offer investors the opportunity to invest in real estate through a fund that is professionally managed, rather than navigating the often precarious, expensive and time-consuming world of real estate investing on their own. Pooling investor funds together for REITs also allows investors to invest in larger scale properties such as hotels and office buildings that would be financially impossible for most of us to do on our own dime.

Another important selling point for using a REIT to invest in real estate is liquidity. It's much easier to sell or transfer your piece of a REIT than to sell or transfer actual real estate.

Like investing in real estate, REITs may also provide you with an income stream from rents. You also have the very good possibility of long-term appreciation if the real estate market goes up.

Another characteristic to keep in mind about REIT mutual funds are that they are closed-end funds.