New Investor? 11 Reasons It Pays to Look at REITs From the Start

As an investor, your goal should be to make as much money as possible without subjecting yourself to undue risk. And while there's pretty much no such thing as a risk-free investment, if you do your research, you might manage to assemble a portfolio loaded with high-quality assets. One of those assets, however, could be REITs, or real estate investment trusts. Here's why it pays to put money into them early on.

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Investing in real estate is a great way to diversify your portfolio. But owning income properties carries risk. With REITs, you can put money into real estate without having to own or maintain actual properties yourself.

ALSO READ: If I Were to Buy an Income Property, I'd Only Do It Under These Circumstances

REITs are required to pay at least 90% of their taxable income as dividends. As such, if you load up on REITs, that's a predictable stream of income you can look forward to. And if you don't need to cash out your dividends, you can reinvest them to grow your portfolio even more.

Because REITs have specific dividend-related requirements, they tend to pay more generous dividends than most stocks. Now, this isn't to say that all REITs pay a large dividend. But if you're eager to capitalize on higher payments, you can search specifically for REITs that pay more.

In recent years, demand for industrial space has soared as consumers have done more shopping online. Similarly, the need to securely store data has increased as more people have begun working remotely. And you can capitalize on these trends as a REIT investor by purchasing industrial and data center REITs.

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

When a recession hits, certain stocks can get battered. If you buy the right kinds of REITs, you can protect your portfolio to some degree. That's because some REITs -- notably, healthcare REITs and residential REITs -- are fairly recession-proof.

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Because a lot of people's living situations are in flux in the wake of the pandemic, self-storage REITs are big right now. That's something you can benefit from. And not just with self-storage. You can take advantage of numerous trends when you put money into REITs.

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

When the stock market tumbles, portfolio values tend to follow suit. But REITs can help ease the pain in that regard because your ongoing dividend payments can help offset losses in your portfolio.

REITs make money by signing long-term leases for the properties they own and operate. As such, your REITs might manage to hold their value even when the stock market plummets. That's because those leases might predate market turbulence, allowing your REITs to continue collecting income.

ALSO READ: What History Shows Us About Market Downturns

Like stocks, REIT shares can gain a lot of value over time. If you hold yours for many years, you may find they're worth a lot more by the time you're ready to sell them. Granted, the same can be said for physical real estate, but REIT growth can outpace home price gains in some cases.

Publicly traded REITs are easy to buy and easy to sell. You can simply log into your brokerage account and acquire or unload REITs as you see fit. That means you can easily convert your REITs to cash, whereas physical real estate can take a lot longer.

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Inflation can drive living costs higher over time. But REITs also tend to increase rent prices over time, thereby increasing their revenue. That allows REITs to gain value nicely and you to keep pace with -- or outpace -- inflation.

ALSO READ: What Is Inflation?

Branching out into real estate is a great way to grow your portfolio. And REITs are a great option in that regard. It pays to learn more about REITs and the different ways they can help you achieve your financial goals.

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