By: Bill and Cindi Porter, AILERON INVESTMENT ADVISORS
Q: Please explain the new REIT sector in the S&P 500.
A: The S&P 500 index includes the stock of 500 individual companies and until recently it was divided into 10 different sectors so that investors can monitor specific areas of the economy (healthcare, energy, financials, industrial, etc.). This format does not change often – but it just did in early September. Now there are 11 sectors.
For many years, REITs (real estate investment trusts) were part of the financial sector along with banks, insurance companies, and other related businesses. Over the past few years, the yield on many REIT stocks has exceeded the yield on most of the other stocks in the financial sector. Additionally, 13 years ago REITs only represented less than 1% of the total value of the S&P 500. Today REITs have grown to over 3% of the S&P 500’s total value.
As a result of this performance and growth, the S&P 500 has moved REITs out of the financial sector and instead created a new and separate sector exclusively for REITs.
While all securities including REITs have inherent investment risks, reward potential, cycles, and political risks, we feel that this is a positive long-term development. It may be a good time to discuss the ups and downs of this new S&P 500 sector and other opportunities with your trusted advisor.
This is for education only. Before using this information in any way discuss it with a financial professional. There are many risks associated with stock trading. You may lose some or all of your financial investment. Securities offered through Dempsey Lord Smith, LLC Member FINRA/SIPC. Securities offered through Integrated Financial Planning Member FINRA/SIPC. Advisory services offered through Dempsey Lord Smith, LLC.
