Published on 
August 22, 2023

REITs may not diversify your portfolio as much as you think

Aleksandra Yurchenko

CAIA association recently explained why REITs ( Real Estate Investment Trusts) cannot be the keystone of your portfolio. Their analysis revealed that broad REITs ETFS have 1. High Correlation to Equities, 2. High beta to the stock market, and 3. near zero correlation to bonds, thereby limiting their diversification benefits. Mortgage and residential REITs have some advantages and disadvantages compared to other common income-generating assets.

REITs Vs Bonds

Higher yield than government bonds and some corporate bonds currently. But yields are variable, unlike the fixed coupons of most bonds.

Less interest rate sensitivity than bonds. But still impacted by rate changes.

Higher risk than investment-grade bonds. Similar to high-yield corporates.

REITs Vs Dividend Stocks

Higher dividend yields on average than S&P 500 stocks.

Less volatile dividends than individual companies. It smoothed out across many properties.

Still equity-correlated, although with a lower beta than broad markets.

Narrower diversification than a dividend ETF across many market sectors.

In summary, mortage and residential REITs offer lower risk than broad REIT ETFs and better diversification than equities. Full scoop here:

About the author

Aleksandra Yurchenko

Aleksandra is managing investor relations at KILDE, a regulated platform for alternative investments. KILDE is powering digital lending firms with debt capital to reach underbanked customers in South East Asia.


No items found.

Want to access our exclusive deals?