30 November 2005

Investing in real estate

For an increasing number of consumers, property investment is widely regarded as being an integral part of their pension portfolio.

Property behaves differently to both equities and bonds and provides the classic diversifier - helping to create a balanced spread of investments. In addition, after the disastrous performance of many mainstream pension funds in recent years, many investors feel more confident investing in property - an asset they actually feel they understand.

But - and it is a big but - for most investors the problem is that individual properties are generally far too expensive. For somebody looking for a small level of exposure to the property sector, direct investment doesn't always suit their needs.

A potential solution to this problem has been discovered in the shape of the proposed UK Real Estate Investment Trust (REIT). Put simply, a REIT is a collective investment through which investors are able to purchase a stake in a large property portfolio without actually owning the bricks and mortar outright. Whilst this structure is new to the UK, it already exists in many parts of the world, most noticeably in the US and Australia.

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