It's easy to understand why anyone would be hesitant to invest in real estate or the stock market these days. But a growing number of experts think there's a way to tiptoe back into both embattled areas‹with the help of exchange-traded funds.
ETFs offer a simple way to invest in several companies that trade as one‹which is particularly helpful in tricky areas of the market like real estate. These firms are usually structured as high-dividend-paying Real Estate Investment Trusts, or REITs, which are trading these days well below the value of the underlying properties. Dionisio Meneses, comanager of the Schwab Global Real Estate fund, calls some of the valuations "mind-boggling." Those low valuations are due to fears that commercial property firms could face widespread vacancies and difficulties raising capital from troubled banks.
But those fears may be overblown, says Jeff Hanson, president of the asset management firm Grubb & Ellis Realty Investors. Hanson says that while commercial vacancies are expected to rise this year, they won't become "unmanageable" like they were during the rampant overdevelopment of the late 1980s and early 1990s. What's more, many analysts think the government's massive bailout of banks should continue to slowly ease the tension that is restricting capital.
That said, this area isn't for the faint of heart. REIT ETFs sank 50 percent last year, and some argue they could fall further. Still, ETFs limit the chances of getting hit by the problems of any single firm. Two particularly diverse options: iShares Dow Jones U.S. Real Estate Index (IYR: 25.68, +3.00, +13.22%), which pays a 9.9 percent dividend, and SPDR DJ Wilshire International Real Estate ETF (RWX: 18.81, +1.26, +7.17%), which yields 6.3 percent.
http://www.smartmoney.com/Investing/ETFs/A-Real-Estate-Play-For-These-Times/?afl=yahoo
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