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7 REIT Sectors That Can Help You Diversify Your Portfolio

By Maurie Backman - Oct 11, 2022 at 11:10AM
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7 REIT Sectors That Can Help You Diversify Your Portfolio

When you want to branch out

If you've yet to invest in real estate, it could pay to start looking at REITs, or real estate investment trusts. REITs are companies that own and operate portfolios of various properties. They're a great way to diversify your investments and enjoy a stream of what could be some very generous dividends. If you're interested in REITs, here are a few sectors worth looking at.

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The inside of a warehouse packed with goods.

1. Industrial REITs

Industrial REITs operate warehouses and fulfillment centers. And right now, the demand in that segment is strong. The pandemic created a shift to e-commerce that's made distribution centers and warehouses more of a necessity. So branching out into industrial REITs could present a nice money-making opportunity.

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Servers in a data center.

2. Data center REITs

As consumers increasingly purchase goods online and workers no longer do their jobs from a single location, the need to store data securely is apt to rise. That makes data center REITs an option worth looking at. Although data centers can be costly to operate (they need great security and climate control, among other things), it's clear that this sector has the potential to explode.

ALSO READ: 3 Really Good Reasons to Invest in Data Center REITs

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The interior of a shopping mall.

3. Retail REITs

Retail REITs operate malls and shopping centers -- and took a beating in 2020 when stores closed in record numbers. But as much as consumers have increased their online spending in the wake of the pandemic, it's easy to still make the case that physical shopping centers are here to stay -- especially those anchored by thriving big-box stores. If you're nervous about investing in specific retail stocks, you may want to look at retail REITs instead.

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Apartment buildings with trees and flowers along a city sidewalk.

4. Residential REITs

Resident REITs manage complexes that provide residences for multiple people -- think apartment communities and manufactured home parks. The upside of investing in residential REITs is that people will always need places to live. And that makes this sector a strong candidate for getting through periods of economic decline.

ALSO READ: Why I'm Seriously Thinking of Loading Up On Residential REITs Right Now

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Signs for emergency room and hospital main entrance.

5. Healthcare REITs

Healthcare REITs own and operate hospitals and urgent care centers. Because there's a perpetual need for healthcare services, this segment is considered fairly recession-proof. That doesn't mean you're guaranteed to make money if you invest in it. But what it does mean is that you may not have to worry as much about the value of your REITs declining during trying economic times.

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Group of cell towers.

6. Infrastructure REITs

Infrastructure REITs own and operate different types of infrastructure -- everything from cell phone towers to energy pipelines. Now, on the one hand, this REIT sector may be a little harder to wrap your head around because you're not investing in properties in the classic sense. Rather, you're investing in assets integral to a functioning society. But as the demand for solid infrastructure continues to grow, this segment could see a lot of expansion.

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Person packing a box in a self-storage unit.

7. Self-storage REITs

A lot of people's lives have been in flux since the pandemic. Between rising rents, sky-high home prices, and the option to work remotely, many people have needed a way to store their belongings while they navigate different changes. As such, there's been a solid level of demand for self-storage, and that demand could hold steady or increase through the years.

ALSO READ: Why Self-Storage Real Estate Can Make Investors a Fortune

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Person sitting at desk and typing on a laptop.

Which REIT sectors are right for you?

As is the case with any investment, putting money into REITs does carry some risk. And these specific sectors aren't guaranteed to make you wealthy or protect you from losses. But each one is an option worth considering for one reason or another. So if you've yet to start investing in real estate, you may want to consider branching out into REITs and seeing where that takes you.

The Motley Fool has a disclosure policy.

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