The last time I checked my portfolio balance, it was down about 30% year to date. I'm not sure exactly what type of on-screen loss I'm facing at this point because I've made a concerted effort to not check my balance too frequently. After all, I know the numbers aren't good, so I figure, why torture myself?
But while most of the stocks I own are down right now, there's been a steady stream of income rolling into my portfolio since all of this market volatility began. And it's all because I made the decision to load up on a very smart investment.
Image source: Getty Images.
The upside of owning REITs
One of my goals in establishing my portfolio is to maintain a diverse mix of stocks. A while back, I realized I wasn't very heavily invested in real estate. I decided to correct for that by adding REITs (real estate investment trusts) to my portfolio.
What I love about REITs is that they're required to pay at least 90% of their taxable income to shareholders as dividends. So while the REITs I hold aren't my only source of dividend income, they tend to pay me generously compared to some of my other dividend-paying stocks.
Meanwhile, over the past number of months, as my portfolio balance has decreased, I've gotten my share of dividend payments thanks to my REIT holdings. While those payments are by no means compensating for the losses I've seen on screen, they're definitely softening the blow.
Now what I like to do with my dividend income is reinvest it, and that basically aligns with my overall investing strategy. The stocks in my portfolio are investments I hope to hold for decades, and I don't rely on them as a cash source. I like to treat my dividend income similarly and put it to work to grow my portfolio even more.
In recent months, I've been trying to pump more money into the stock market, since many quality stocks have been trading at a discount. The dividend income I've received from my REITs has made it possible to expand on that and scoop up even more shares of the companies I want to own.
What can REITs do for you?
REITs have allowed me to branch out in my portfolio and collect a steady stream of dividend payments. If both of those things sound like something you'd like for yourself, then it pays to consider putting some money into REITs.
Of course, you don't just want to look at dividend yields when choosing your REITs. Rather, you want to look at how well a given company manages its cash flow, the percentage of properties it has leased, and what plans, if any, it has for expansion. You may also want to focus on REIT sectors that are poised for solid growth, like industrial REITs, which have seen an uptick in demand due to an increase in e-commerce over the past few years.
All told, REITs have really been a nice silver lining at a time when things have looked overwhelmingly bleak in my portfolio. And I'm really grateful I made the decision to put my money into them.
