By Billy Fisher NEW YORK ( MainStreet)--Retail investors can realize numerous benefits from investing in real estate investment trusts (REITs). Dividends, protection against inflation and exposure to real estate are just a few incentives for buying in. As with any investment, REITs do carry their risks. Here are some key points to keep in mind when deciding whether or not to purchase these securities. Real Estate Diversification A major advantage to investing in REITs is accessibility. "For the average person, their primary real estate is their residence," said Michael Cuggino, portfolio manager of the Permanent Portfolio (PRPFX), a $16 billion mutual fund. "Most people aren't going to go buy a shopping mall or an office building, so they allow you to participate in various aspects of real estate which gives you broader diversification for your real estate holdings."
Regardless of the type of REIT being considered, investors should pay careful attention to valuations. "REITs have a nasty habit of blowing up once a decade," Sorrentino said. "I always caution people to not be the last person to buy into a REIT. When yields get down and prices have been hot for a while, it's best to step away from them."