The tech-stock correction is a perfect example of why putting all your eggs into one basket is risky. While there are dozens of industries that allow you to diversify your portfolio, real estate is one of the few long-established ways of creating wealth and generating income, and should be seriously considered in today's volatile environment.

Thankfully, investors don't have to buy, own, or manage a real estate investment themselves to benefit from the income and other advantages of this reliable asset class. If you're looking to hedge your exposure and diversify your portfolio, here's why real estate stocks are a no-brainer addition.

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REITs offer an easy way to invest in real estate

REITs, which is short for real estate investment trusts, are a special type of company that derives nearly all of its revenue from investing in real estate or real estate-related securities. Shares of these companies, which can be publicly or privately traded, have become popular because they offer exposure to various real estate types while also being required to pay out most of their net income as dividends to qualify for the tax advantages of the unique REIT structure.

Invitation Homes (INVH 1.31%), an equity REIT that specializes in the ownership and leasing of single-family rental homes primarily in the Sun Belt, is a perfect example of the growth potential and income benefits of investing in REITs.

Increased demand for single-family rental homes in recent years has driven rental rates sky-high. At the same time, lack of home inventory has pushed home prices up nearly 20% year over year, boosting the value of its portfolio of more than 80,000 single-family homes. Since the company's initial public offering (IPO) in 2017, the company has outperformed the S&P 500 while also offering a higher dividend yield. And because the company operates on short-term leases, it has the ability to hedge against inflation by raising rents to combat increased costs of operation.

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Going beyond REITs

REITs are one of the most popular ways to invest in real estate, but not the only way. Aside from the budding real estate tech industry, there are brokerages, banks, homebuilders, iBuyers, data providers, and even investment management firms available to invest in.

CBRE Group (CBRE -0.56%), for example, is a hybrid of these. It's one of the leading commercial real estate advisors, helping to lease, list, and manage commercial real estate for independent operators. Additionally, the company provides data for the commercial market and asset valuations, while developing and managing its own real estate portfolio.

CBRE Group has consistently outperformed the S&P 500 since its IPO in 2004, providing twice the total return during that period, and it had an incredibly strong year, despite market volatility.

Another stand-out real estate stock is the homebuilder LGI Homes (LGIH -1.52%) which is benefiting from the robust need for more housing. LGI has reported stellar earnings over the past year, while also managing to outperform the S&P 500 over the last 10 years, and it's in a strong position for continued growth because of today's housing shortage.

Real estate stocks certainly have their own challenges and headwinds to overcome. Most of them are driven by completely different factors from the rest of the stock market, which can be a great way to diversify and hedge a portfolio against volatility or inflationary risks.

As always, using core principles when choosing which real estate stocks to buy is paramount, allowing you to identify companies in high-growth industries with well-run management and strong track records.