Physician investors looking to achieve a healthy level of diversification in their portfolio may want to consider investing in real estate. Real estate, however, is a cumbersome and costly investment option that can also be very risky. Even if you have over $500,000 to invest in real estate, if you go it alone you can only buy one or two houses. If the market tanks in that specific area of purchase, your investment can quickly shrink—and this isn’t even including the challenges of maintenance, managing renters, taxes, and illiquidity. So how can a physician, who doesn’t have millions of dollars to throw around, invest in real estate? They can explore real estate investment trusts (REITs).

The National Association of Real Estate Investment Trusts (NAREIT) defines REITs as companies that own real estate and real estate-related investments in a range of sectors that produce income. This can include housing developments, apartment complexes, malls, office spaces, and the like. Investors can then buy shares of the REITs similar to mutual funds or exchange-traded funds (ETFs). It is important to note that REITs need to adhere to strict requirements and regulations and are, therefore, permitted to trade on the major stock exchanges.

Real Estate can be a valuable investment vehicle with the potential for significant gains. REITs make it possible for regular investors, not just investment bankers or tycoons, to get in on the action with a reasonable cost of entry.

US News and World Report recently offered their recommendations for the best REITs to own. These included: Vanguard Real Estate ETF (ticker: VNQ), iShares U.S. Real Estate ETF (ticker: IYR), and Global X Data Center REITs & Digital Infrastructure ETF (VPN). Some of the things to look for when choosing a REIT are low associated fees and diverse holdings. Also note that some REITs, like VanEck Vectors Mortgage REIT Income ETF (ticker: MORT), don’t hold property, but instead hold mortgages; this can make a difference when determining the diversification of your own portfolio.

As with any new investment venture, be sure to talk this through with your financial advisor to help find the REITs that are the best match for your investment goals.

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