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Build a Strong Portfolio With REITs: Opinion

In the "Handbook of Alternative Assets," Mark J.P. Anson explains:

"Real estate is not an alternative to stocks and bonds -- it is a fundamental asset class that should be included within every diversified portfolio. Equity, fixed income, cash, and real estate...are the basic asset classes that must be held within a diversified portfolio."

It's clear that some investors have long memories and some still grapple with the fact that commercial real estate was ravaged by the credit crisis along with every other asset class. However, the REIT evolution is unfolding and the data support the argument that REITs should be a core component for an investor's portfolio.

In the book "The Random Walk Guide to Investing," Burton G. Malkiel (Princeton) wrote:

"Basically, there are only four types of investment categories that you need to consider: cash, bonds, common stocks and real estate."


I write about REITs (to be honest, I preach REITs) and I have a high bias that the forced dividend-based asset class should be a core asset class (as opposed to an alternative) simply because of the dramatic shortage of quality yield in the marketplace. This biased attraction is driven by the fact that REITs have a highly efficient structure of paying out consistent and reliable dividend income (remember, REITs are forced to pay out at least 90% of taxable income).

In addition, real estate is one of the few gems that can protect your portfolio from the effects of inflation. No wonder I call them "Sleep Well at Night" (SWAN) investments.

Make sure to check out my videos on The Street later this week and make REITs part of your SWAN portfolio.

For more information on REITs, see my Web site.

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

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