NEW YORK ( TheStreet) -- It's hard to argue REITs should not be in your core portfolio when the dividend-centric sector is crushing just about all other well known asset classes.Year to date, all equity real estate investment trusts have returned over 15%, according to NAREIT, beating out the broader S&P 500 index (11.6%) and the Russell 2000 (9.2%).
Why should REITs be a core asset in your investment portfolio? "The essence of diversification is that combining assets whose returns follow different drivers can reduce your portfolio volatility without forcing you to accept lower returns," explained Brad Case, senior vice president with NAREIT. "The three liquid asset classes that respond to different return drivers are REIT stocks, non-REIT stocks and bonds. That's why those three assets, along with cash, are essential to any diversified portfolio." Remember that part of the attraction to REITs is you are investing in "brick and mortar" but you are also investing in the management teams. You have the best of both worlds: exposure to diversified real estate as well as professional management. Based upon the confluence of financial market reforms and the continuing evolution of REITs as a coherent asset class, investors are beginning to gain more confidence.