Yes, even boring REITs can make you rich.
They’re not very trader-friendly, but for those with a long-term mindset, that’s actually a good thing. Many young investors take a raincheck on REITs because frankly, the asset class gets a bad rap amongst those who’d rather put their money on “sexier” investments that’d make for better conversations at the water cooler. If you’re not one to “brag” about big moves made in your holdings and would rather build your wealth over prolonged periods, REITs could have the potential to be your portfolio’s best friend.
In return for the lower magnitude of growth with REITs, you’re getting a higher degree of predictability and a lower degree of volatility in aggregate. That’s a trade-off that’s clearly worthwhile for older investors, and as the markets continue to experience erratic moves, I’d say investors of all ages ought to think about gaining some exposure to REITs, which have been and will likely continue being a top-performing asset class this year.
Consider two of the low-beta REITs out there that you can hold as we head into a trade war-driven recession:
InterRent REIT (TSX:IIP.UN) Here’s a REIT that’s the renovation king of the TSX. The strategy of buying mismanaged properties for less, sprucing up acquired properties and beefing-up management to prop up rents has been a model that’s paid huge dividends.
It’s a model that works, and management has doubled-down on this synergetic style of growth in a relatively low growth sector. As a result, InterRent has doubled in just over two years, and although the 2% yield is unattractive to the income savvy, the ridiculously low beta of 0.13 and the sheer momentum behind the REIT in these times of turmoil ought to have the name on the radars of all investors.
InterRent’s in a bull market of its own, and it’s not about to end as Trump goes all out on tariffs. That’s peace of mind that money can buy!
Killam Apartment REIT (TSX:KMP.UN) With a 0.37 beta, Killam is another growthy REIT that’s trading off in its own world and couldn’t care less about the geopolitical turmoil that has many of us worried. The name has a nice 3.5% yield slated to grow at an above-average rate thanks in part to a stellar management team that’s found a way to ramp up growth on the Atlantic coast.
Like InterRent, Killam’s advantage lies in management’s low risk strategic moves that take advantage of opportunities within its area of expertise.
“In spite of the growth-killing requirements that have been set for all REITs, Killam has found a way to grow its distribution and stock price through the exceptional management of operations, resulting in applaud-worthy efficiencies and enough cash flow growth not only to line the pockets of investors but to finance further developments in Killam’s target markets,” I said in a prior piece.
Foolish takeaway Both InterRent and Killam are extremely low-beta investments that’ll allow you to do well even if the broader markets were to crumble like a paper bag over Trump’s next tariff threat. In a market environment like this, it’s only prudent to spread your bets across categories that will better allow you not to get demolished as uncertainties spike.
Stay hungry. Stay Foolish.
Fool contributor Joey Frenette has no position in any of the stocks mentioned.
The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool Canada’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Motley Fool Canada 2019