A real estate stock is a stock in a company that specializes in owning, developing or managing real estate. By investing in them, investors provide the capital used for developing or managing buildings, which supports the economy through shops, offices and warehouses, as well as providing people with houses to live in. Real estate stocks and ETFs enable investors to invest in diversified real estate portfolio – even if they only make small investments.
We see five main risks, which investors should take into consideration:
By investing in real estate, you invest in just a single sector. The real estate sector’s fortunes can be dependent on specific events (economical, political, demographical). Therefore, it is advisable to invest in these stocks as part of a broader portfolio.
A real estate stock might be denominated in another currency than the investor’s. If this currency depreciates, so too will the investor’s capital.
Real estate investments are typically partially financed by debt. If interest rates rise, this leads to higher financing costs and lower profits.
Changes in the political landscape resulting from political shifts, social unrest, riots, (civil) war or terrorism can, for instance, pose a risk for the Company.
The purchasing power of the invested euro, and by extension the value of the investment, can decrease as a result of monetary depreciation.
For more information on risks, please see the “Risk Factors” section of the relevant Fund’s prospectus, available on www.vaneck.com.
Selecting the right real estate stocks is not straightforward for many individual investors. In these cases, a real estate ETF is a convenient alternative. The VanEck Global Real Estate UCITS ETF invests in a hundred of the most liquid real estate stocks worldwide.
Lower risk: Typically lower reward
Higher risk: Typically higher reward