So far, 2022 has not been a great year for the stock market. And it hasn't been a great year for me as an investor.
As of a few weeks ago, my portfolio was down 30%. Based on stock market activity since then, I'm assuming things haven't changed much. I actually haven't even gone in to access my portfolio for a number of weeks because frankly, it's just too depressing, and I don't need the stress.
But while I don't love the fact that I'm down so much, the reality is that I'm not flipping out. For one thing, the investments I'm holding are earmarked for retirement, and I'm not planning to reach that milestone for several decades. Plus, the stock market has a long history of recovering from downturns, so I'm trying to take this current one in stride.
Image source: Getty Images.
But there's another reason I'm less stressed about my portfolio being down: I own a number of REITs, or real estate investment trusts. And while some of my REIT shares are down right now, owning them means I have incoming cash to look forward to.
The upside of owning REITs
REITs offer a dual opportunity to make money. First, there's share price appreciation. The REITs I've chosen are ones I think have a lot of growth potential, so I'm hoping that in time, my shares will be worth more than their current value.
But just as importantly, REITs are required to pay 90% of their taxable income to shareholders as dividends. And so the dividend payments I collect from my REITs in the near term should help offset some of the losses I'm seeing in my portfolio.
Now what I like to do with any dividend income I collect, whether from REITs or other dividend-paying stocks, is reinvest it. But I also know that if I want or need to, I can cash out those dividend payments as I see fit.
Granted, because I don't rely on my portfolio as a cash source, that's something I probably won't need to do anytime soon. But the knowledge that I can do it gives me peace of mind.
It pays to look at REITs
I like holding REITs, not just for the dividends they pay, but for the diversity they lend to in my portfolio. One of the reasons I'm down so much this year is that I'm pretty heavily invested in the tech sector, which has taken a really hard hit. But by owning REITs and continuing to add more, I'm increasingly branching out in my portfolio to buy myself added protection.
If you've yet to dabble in REITs, it could pay to do some research and see if they're an appropriate investment for you. Right now, it's possible to scoop up some REITs at a discount due to the general state of the market, so it's a great time to look at different real estate companies and see which ones are a good fit for you.
