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The Right REITs for Retirement

Real estate investment trusts (REITs) are outpacing the stock indexes, observes Bob Carlson, a leading fund and ETF expert and editor of Retirement Watch.

We reintroduced REITs to our model portfolios in early 2017 through Cohen & Steers Realty Shares (CSRSX). It’s returned 12.77% for the year to date. Over 12 months the total return of CSRSX is 17.45%.

The fund focuses on select sectors of the REIT market. First, the fund managers develop outlooks for the national economy and regional economies. Then, they determine which REIT sectors are likely to benefit from those outlooks.

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Finally, they use their in-depth knowledge of the universe of REITs to select those with quality properties and management who are likely to benefit from the environment. Recently, the fund held 45 stocks and had 46% of the fund in the 10 largest positions.

The top sectors in the fund recently were apartments (15%), health care (12%), data centers (11%), offices (10%) and industrial buildings (8%). Top holdings were Welltower (WELL), UDR (UDR), Essex Property Trust (ESS), Equinix (EQIX) and Prologis (PLD).

We hold REITS through owns through Cohen & Steers REIT & Preferred Income (RNP). This is a closed-end fund that is about equally split between REITs and preferred securities.

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The shares have been appreciating faster than the net asset value, so the discount to net asset value has decreased to 9.72% from a six-month average of 11.61%.

The distribution yield is 7.45%. The fund hasn’t made any return of capital distributions this year but has in each of the last three years. RNP uses about 25% leverage.

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