TRRSX or FRESX: Which Real Estate Mutual Fund to Buy? – December 2, 2020

For investors looking to park their money in the real estate sector, mutual funds are the cheapest and most convenient options. This category of funds offers solid protection against inflation. The real estate sector has recently seen tough times but the presence of this investment vehicle adds stability to a portfolio.

Usually, volatility in property prices is far less than the extent experienced by stocks. Adding such funds to a widely diversified portfolio would increase returns, while significantly reducing the associated risk.

Meanwhile, the Real Estate Select Sector SPDR Fund (XLRE) has gained 4.6% over the past six months despite extreme market volatility. So, investing in real estate mutual funds seems prudent as of now. Let us look at two of the best funds from the space and find out which one is a better investment.

TIAA-CREF Real Estate Securities Fund Retirement Class (TRRSX Free Report)

The fund seeks maximum total returns over the long run through growth of capital and current income. TRRSX invests a large chunk of its assets in companies primarily involved in operations related to the real estate domain. The fund may invest a maximum of 15% of its assets in securities issued by foreign entities. 

This Sector-Real Estate product has a history of positive total returns for over 10 years.  Specifically, the fund’s returns are 5.3% over a three-year period and 6% over a five-year period. To see how this fund performed compared with its category, and other #1 and 2 Ranked Mutual Funds, please click here.  

TIAA-CREF Real Estate Securities Fund Retirement Class, as of the last filing, allocates its assets in the top two major groups; Small Value and Intermediate Bond. Further, as of the last filing, American Tower Corp and Prologis Inc. were the top holdings in TRRSX.

This Zacks Mutual Fund Rank #1 (Strong Buy) fund was incepted in December 2002 and is managed by TIAA-CREF. TRRSX carries an expense ratio of 0.75% and requires a minimal initial investment of $0.

Fidelity Real Estate Investment Portfolio (FRESX Free Report)

The fund aims for better-than-average income and long-term capital appreciation. The fund invests the majority of its assets in companies primarily engaged in the real-estate industry and other real-estate-related investments. It mostly invests in common stocks.

This Sector-Real Estate product has a history of positive total returns for over 10 years.  Specifically, the fund’s returns are 1.3% over a three-year period and 3.8% over a five-year period. To see how this fund performed compared with its category, and other #1 and 2 Ranked Mutual Funds, please click here.

Fidelity Real Estate Investment Portfolio, as of the last filing, allocates its assets in the top two major groups, Small Value and Intermediate Bond. Further, as of the last filing, Prologis Inc. and Digital Realty Trust Inc. were the top holdings for FRESX.

This Zacks Rank #1 (Strong Buy) fund was incepted in November 1986 and is managed by Fidelity. FRESX carries an expense ratio of 0.74% and requires a minimal initial investment of $0.

To Conclude

While both TRRSX and FRESX are buy-rated funds, upon taking a closer look, we find that the former is a clear winner. Meanwhile, both the funds are dirt cheap. However, the administrative and other operating expenses of TRRSX are higher than FRESX’s.

It should, however, be noted that TRRSX offers lower risk and higher returns compared to FRESX. Notably, FRESX has a three-year beta of 0.71 compared with TRRSX’s 0.68. Therefore, TRRSX is the fund that one must bet on given its mildly lower risk and consistently higher returns.

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