Investing in the real estate sector adds stability to one’s portfolio, mainly because volatility in property prices is far less than what is experienced by stocks. So, investors willing to hold long-term positions would do well to consider real estate mutual funds as these add stability and bring steady returns. This category of funds also offers superior protection against inflation and is a solid investment choice.
Meanwhile, the Real Estate Select Sector SPDR Fund (XLRE) has gained 7% over the past six months. So, investing in real estate mutual funds seems prudent as of now. Let us look at two of the best funds from the space and find out which one is a better investment.
Fidelity Series Real Estate Income Fund FSREX
This fund aims for higher than average income, with capital appreciation as a secondary goal. FSREX invests the lion’s share of its assets in securities of companies principally engaged in the real estate industry and other real estate related investments. The fund invests in U.S. as well as 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 are 6.2% over a three-year period and 6.9% over a five-year period. To see how this fund performed compared with its category, and other #1 and 2 Ranked Mutual Funds, please click here.
Fidelity Series Real Estate Income Fund, as of the last filing, allocates its assets in the top two major groups; Intermediate Bond and Small Value. Further, as of the last filing, Two Harbors Investment Co and Annaly Capital Management were the top holdings in FSREX.
This Zacks Mutual Fund Rank #1 (Strong Buy) fund was incepted in October 2011 and is managed by Fidelity. FSREX carries an expense ratio of 0.00% and requires a minimal initial investment of $0.
Cohen & Steers Real Estate Securities Fund, Inc. Class A CSEIX
The fund invests majority of assets in common stocks and other equity securities issued by real estate companies. The non-diversified fund aims for total return. It mostly invests in common stocks.
This Sector-Real Estate product has a history of positive total returns for over 10 years. Specifically, the fund’s returns are 8% over a three-year period and 7.9% over a five-year period. To see how this fund performed compared with its category, and other #1 and 2 Ranked Mutual Funds, please click here.
Cohen & Steers Real Estate Securities Fund, Inc. Class A, as of the last filing, allocates its assets in the top two major groups, Intermediate Bond and Large Growth. Further, as of the last filing, Crown Castle Intl Corp and American Tower Corp were the top holdings for CSEIX.
This Zacks Rank #1 (Strong Buy) fund was incepted in September 1997 and is managed by Cohen & Steers. CSEIX carries an expense ratio of 1.12% and requires a minimal initial investment of $0.
While both FSREX and CSEIX are buy-rated funds, upon taking a closer look, we find that the former is a clear winner. Not only are the administrative and other operating expenses of CSEIX higher than FSREX’s, the latter has a history of providing higher and more consistent returns compared to CSEIX.
It should also be noted that FSREX offers lower risk compared to CSEIX. FSREX has a three-year beta of 0.61 compared with CSEIX’s 0.79. Therefore, FSREX is the fund that one must bet on given its mildly lower risk and consistently higher returns.
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