Adding Real Estate
To Your Investments

Real-estate mutual funds have been among the best-performing type of U.S.-stock funds, outperforming the Standard & Poor's 500-stock index over the past few years (see chart). But their performance can be volatile. After declining some 5% earlier this year, they have rebounded slightly to return an average 0.76% for 2005, according to Lipper Inc. While the housing market may be booming, most real-estate funds have little exposure to the residential market. Instead, they invest primarily in real-estate investment trusts, or REITS, that own commercial properties.

WHAT TO DO: Real estate doesn't necessarily move in relation to equities or fixed-income securities, which may make it a good buffer. But while investors may be looking to have some real estate in their portfolio, there's debate over the best way to do it, a WSJ article says. Columnist Jonathan Clements explains why the changing interest-rate picture can complicate returns for REIT funds, and how to spread your market bets. Plus, sort through REIT winners and losers.

By the Numbers

The top-performing funds in the real-estate category, ranked by year-to-date total returns.

Note: For the period ended May 31. All performance numbers are preliminary. Assets as of April 30.

Source: WSJ Markets Data Group and Lipper Inc. 

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