15 Compelling Reasons to Invest in REITS in 2022

If you're considering the best ways to invest your money in the current market, real estate investment trusts (REITs) should certainly be on your list of potential buys. Investing in everything from residential or commercial real estate to real estate loans, REITs can provide your portfolio optionality and diversification in all market environments.

If you're on the fence about investing in REITs in 2022, here are 15 compelling reasons to take the plunge.

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One of the great things about investing in REITs is that you can put your money into any number of types of real estate that interest you most. There are REITs for just about every type of investor and investment portfolio.

REITs span many sectors -- industrial, retail, healthcare, tech, utilities, and infrastructure, to name a few -- allowing you to invest in the spaces that best align with your overall thesis for your portfolio while expanding beyond individual stocks.

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Real estate investing is often viewed as a wealthy investor's game. Nothing could be further from the truth. Most REITs are publicly traded on the stock market, meaning you can buy them through your brokerage account just as you do stocks.

Many brokerages will also allow you to purchase fractional shares of a REIT, enabling you to invest only the amount you're comfortable with or can at any given point but still venture into the real estate investments you find most compelling.

In addition to making it possible to invest in many types of real estate at once, REITs allow you to enjoy the rewards of steady dividend income. Most REITs distribute dividends quarterly, but some pay much more frequently, including monthly.

REITs are reliable sources of dividend income because federal law actually requires them to pay out at least 90% of their taxable earnings to shareholders as dividends.

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Real estate investing is often seen as a fairly time-consuming, capital-intensive venture. Depending on how you approach it, that may be the case. For example, buying and flipping or renovating a cheap home can be a very high-risk -- albeit potentially high-reward -- way to invest in the real estate space.

Investing in REITs allows you to put your capital to work in a pool of investments representing many areas within the real estate industry, but you don't need a ton of cash to do so. And while no investment is risk-free, you simply won't take on anywhere close to the same risk as you would if you were buying an actual property.

Different REIT sectors present varying levels of risk and return. For example, office REITs tend to be somewhat cyclical, especially in today's rapidly changing work environments, whereas healthcare REITs are far more recession-resistant and less impacted by economic changes.

As an investor, you must understand your risk tolerance before putting money into any asset, including real estate. Ideally, you should be investing in REITs across several real estate classes and sectors to not only balance the risk they add to your portfolio but also increase your potential overall returns.

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Dividend-paying investments like REITs are particularly attractive because they can provide an additional source of income over time and increase an investor's overall returns.

You also can use dividend payouts for things like building your nest egg or emergency fund or, of course, reinvesting in your portfolio. If a REIT steadily increases its income over time -- as it should -- its dividend payouts will increase, too.

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REITs can be wise and profitable additions to any investor's portfolio. That is true whether you are a seasoned investor with significant capital to draw from or just starting your portfolio and have only a modest amount of cash.

REITs make real estate investing remarkably accessible to anyone, making them an incredibly popular vehicle for building wealth through real estate.

Investing in REITs entails far more than simply choosing between commercial or residential property. These funds own and operate properties with tenants involved in almost every business imaginable.

By investing in a REIT, you can share in the rental revenues generated by tenants ranging from hotels, single-family homes, hospitals, and telecommunication towers to cannabis growers, industrial warehouses, offices, and storage units.

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You've likely heard the old saying -- in both life and investing -- about not putting all your eggs into one basket.

Look at it like this. Let's say you put your money into only a few types of investments in one or two industries. If stock market or sector headwinds strike -- or even if your investments do fine but grow at around the same rate -- you probably won't realize the long-term gains you're hoping for.

However, by investing in diverse asset types, including real estate, your portfolio has more opportunities to pull from a variety of growth sources. Over time, this could not only balance your portfolio as it rides the market's ups and downs but also enhance your returns and profits.

Real estate is often viewed as an inflation hedge for several reasons. For one, as inflation rises, real estate prices typically follow. Another reason is that REITs often have multi-year leases with tenants. What's more, landlords are often able to increase rents to keep up with inflationary pressures, allowing REITs to maintain profits and dividend growth.

Of course, different sectors of real estate experience varying degrees of vulnerability and volatility amid inflationary periods. This goes back to understanding your appetite for risk when choosing the types of REITs you want to buy and then investing accordingly.

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Most investors don't have hours every day to dedicate to their portfolios. Whatever your investing style, REITs can enable you to allocate money across different areas of real estate more quickly.

Even so, before adding any REIT to your portfolio, you should always take ample time to learn about its sector and underlying business or businesses to ensure they fit with your investment preferences and aptitude for risk.

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It is not uncommon for a REIT to implement mid-single to double-digit dividend increases every year. In fact, some of the best REITs have extensive track records of doing so.

Coupled with the ability to realize gains from share price appreciation over the years, this is another reason these types of investments are so compelling in various market environments.

Before putting money into any investment -- real estate or otherwise -- you should always research the business carefully to ensure you understand it and that it is the right investment for your portfolio.

However, REIT investing requires you to expend far less time and money than many other forms of real estate investing, such as actively managing a property.

If you're short on time but want to build a high-quality portfolio that stands the test of time, REITs make getting into real estate as easy as buying and selling regular stocks.

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There's no denying that the range of catalysts currently infused into the real estate market is creating a dynamic unlike anything investors have seen in years. Historically, however, real estate has proven itself time and again to be a great hedge against inflation and robust long-term investment to ride out market storms. REITs are typically an ideal option to capitalize on this dynamic.

Of course, not every single REIT is ideal. But generally speaking, REITs have a solid track record of outpacing the stock market's performance over the years. The share price and dividend appreciation these investments offer make them a solid choice for any investor.

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Many investors are unsure where to put their investment capital nowadays, particularly as recession fears loom, market volatility continues, and interest rates skyrocket. If you're approaching your investments with a time horizon of three to five years (or longer), not even another bear market should make you run for the hills or cash out.

REITs offer a tried-and-true means of investing in real estate and don't require buying property yourself or having tons of money -- but they can enable you to reap returns (and dividend income) for years to come.

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