Putting your money in bricks and mortar can bring a real-world aspect to investing. Being able to actually see and touch an element of your portfolio makes a difference to stocks and shares on a screen, and can often make investors feel more in touch with their investment.
The trouble comes when we start to talk about one of the basic tenets of investing - diversification. Having all your money tied up in one or more residential properties means you’re 100% exposed to fluctuations in that market; the opposite of spreading your risk across different assets. There’s also the issue of liquidity - it can be tricky getting your money out of property if you need it quickly. And the less said about troublesome tenants, the better.
One way to address these risks head-on is to opt for a diversified approach to property investment through an open-ended mutual fund or exchange-traded fund (ETF).
The iShares Global Property Security Equity Index Fund, part of the Fidelity Select 50, is a passive fund which invests in a range of real estate investment trusts (REITs) across the globe with the aim of matching the performance of listed real estate companies and REITs worldwide. REITs are themselves already well-diversified and give investors access to residential property as well as hotels, industrial units, office space and real estate holding companies.
Over half of the fund’s global exposure is to the US, with each component addressing distinct areas of the property market.
America’s largest retail REIT, the Simon Property Group, is the top holding in the fund. Headquartered in Indianapolis, the company is the largest shopping mall operator in the US, concentrating its efforts on premium outlet centres, regional malls and international properties.
Another of the top holdings is assisted living-focused Welltower Inc. The Ohio-based REIT invests in housing for the elderly and related care facilities in the US, Canada and the UK.
In line with the index, the fund’s second most prominent country is Japan. Here, exposure among the top ten holdings comes through real estate developer Mitsui Fudosan. With projects and branches from Honolulu to Tokyo, the company splits itself into four key areas - office buildings, real estate services, accommodation, and retail.
As a result of the fund’s holdings being inherently diversified, investors gain immense access to all parts of the sector around the world.
For investors looking for access to the property sector but wary of putting all their eggs in one basket, the iShares Global Property Security Equity Index Fund offers low-cost, diversified access to the overall direction of global markets without taking big bets on a single property or sector.
For more on the iShares Global Property Security Equity Index Fund, visit the factsheet here.
The value of investments and the income from them can go down as well as up, so you may get back less than you invest. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. Select 50 is not a personal recommendation to buy or sell a fund. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.