4 Best-Performing Real Estate Mutual Funds So Far in 2020 – July 31, 2020

The real estate industry has demonstrated remarkable strength even as the coronavirus pandemic keeps rattling the U.S. economy. A low interest rate environment, resulting in record low mortgage rates, has boosted construction activity in the country.

Thanks to the Federal Reserve’s decision to keep its benchmark interest rates unchanged at near zero on Jul 29, mortgage rates are expected to hover around record-low levels. The Fed’s federal fund rate remains within a range of 0% to 0.25%, and was trimmed in mid-March as the coronavirus pandemic made serious damage to the economy.

Now, mortgage rates in the United States generally follow the direction of the 10-year Treasury note yield and bond yields generally decline when prices rise. This low mortgage rate will certainly appeal to customers and bode well for real estate funds. According to Freddie Mac, the 30-year fixed-rate mortgage averaged 2.99% for the week ending Jul 30.

The 30-year fixed-rate mortgage rate has again fallen below the 3% mark for the second time in one month. In the week ending Jul 16, the 30-year mortgage average has hit another all-time low of 2.98%. This makes it clear that the pandemic is constantly putting pressure on the real estate industry and pushing mortgage rates to historic lows this year.

On Jun 24, the U.S. Census Bureau and the U.S. Department of Housing and Urban Development reported that sales of new single-family houses in June rose to 776,000, beating the prior month’s reading of 682,000. The figure is 13.8% above May’s sales and surpassed the consensus estimate of 695,000. And this is a result of the low-rate environment.

4 Funds to Buy

Given the current uptrend, we have selected four real estate mutual funds that stand to gain from record low mortgage rates. All of these funds carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). In addition, the minimum initial investment for these funds is within $5,000. We expect these funds to outperform their peers in the future.

The question here is why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

DWS RREEF Real Estate Securities Fund – Class A (RRRAX Free Report) aims for long-term capital appreciation and current income. The fund invests the majority of its assets and the amount of any borrowing for investment purposes in equity securities of real estate investment trusts (REITs) and real estate companies.

This Zacks sector – Real Estate has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

RRRAX carries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.98%, which is below the category average of 1.20%. It has returned 2.4% over the past three years. The fund has a minimum initial investment of $1,000.

John Hancock Funds II Real Estate Securities Fund Class 1 (JIREX Free Report) aims to achieve a combination of long-term capital appreciation and current income. The fund invests the majority of its assets in equity securities of REITs and real estate companies. This non-diversified fund may invest 10% of its funds in securities of foreign real estate companies.

This Zacks sector – Real Estate has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

JIREX carries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.80%, which is below the category average of 1.20%. It has returned 2.6% over the past 3 years. The fund has no minimum initial investment.

Fidelity Real Estate Income Fund (FRIFX Free Report) aims for higher-than-average income and gives capital growth secondary importance. The fund basically invests in preferred and common stocks of REITs, debt securities of real estate entities, and commercial and other mortgage-backed securities. The fund invests primarily in domestic and foreign real estate issuers.

This Zacks sector – Real Estate has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FRIFX carries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.75%, which is below the category average of 1.20%. It has returned 1.2% over the past 3 years. The fund has no minimum initial investment.

DFA Global Real Estate Securities Portfolio (DFGEX Free Report) aims for long-term capital appreciation. The fund invests the majority of its assets in securities of U.S. and non-U.S. companies in the real estate industry or REITs.

This Zacks sector – Real Estate has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

DFGEX carries a Zacks Mutual Fund Rank #2 and has an annual expense ratio of 0.24%, which is below the category average of 1.26%. It has returned 1.7% over the past 3 years. The fund has no minimum initial investment.

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