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Buy These 4 Real Estate Funds as US Housing Sector Outshines

The housing sector has been emerging as one of the few areas of strength in the U.S. economy, which is suffering a record slowdown due to the coronavirus pandemic. An array of positive housing data has surely underlined the fact in the past couple of days.

Per the U.S. Census Bureau and the Department of Housing and Urban Development’s latest joint report, sales of new homes grew at a pace of 901,000 in July, fairly above the last month’s revised figure of 791,000. In fact, the recent figure is not only 13.9% higher than June, but also beats the consensus estimate of 785,000. The pace of new home sales was the highest since 2006 and is up 36.3% from a year ago.

Per a separate report released earlier this month, the housing starts in July came in at 1,496,000 units. The metric beat June’s revised figure of 1,220,000 and surpassed the consensus estimate of 1,241,000 units. This signals that homebuilding activity in the United States has accelerated the most in nearly four years. In fact, July’s spike is 22.6% and marks the biggest gain since October 2016.

Construction pace in July is the fastest since February, when housing starts peaked at 1,567,000 units. However, the coronavirus outbreak had halted the record-long expansion of the U.S. economy and impacted the housing space.

But current data signals that the U.S. housing sector may continue to soar in the near term. Per a recent data, building permits issuance also rose 18.8% in July at a pace of 1,495,000 and surpassed the consensus estimate of 1,333,000 and June’s revised figure of 1,258,000 units. Additionally, the National Association of Home Builders’ latest report states that confidence among home builders surged to 78 in August. This marks the highest level and matches the December 1998 record.

Our Top Real Estate Fund Picks

Given the positive data from the U.S. housing sector, we have shortlisted four real estate mutual funds carrying a Zacks Mutual Fund Rank #1 (Strong Buy). This sector is constantly emerging as one of the bright spots of the economy. Moreover, these funds have encouraging year-to-date (YTD) returns. Additionally, the minimum initial investment is within $5000. 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).

Fidelity Advisor Real Estate Income Fund Class A FRINX aims for higher-than-average income. As a secondary objective, the fund seeks capital growth. FRINX invests the majority of its assets in common stocks of REITs as well as securities of companies principally engaged in the real estate industry and other real estate-related investments.

This Zacks sector – Real Estate product has a history of positive total returns for more than 10 years. Specifically, the fund has returned 1.6% over the past three years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FRINX has an annual expense ratio of 1.01%, which is below the category average of 1.20%.

MFS Global Real Estate Fund Class R6 MGLRX aims for total return. The fund invests the majority of its assets in equity securities of U.S. and foreign real estate-related investments.

This Zacks sector – Real Estate product has a history of positive total returns for more than 10 years. Specifically, the fund has returned 5.5% over the past three years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

MGLRX has an annual expense ratio of 0.90%, which is below the category average of 1.26%.

DWS RREEF Real Estate Securities Fund - Class S RRREX aims for long-term capital appreciation and current income. The majority of this non-diversified fund’s assets are invested in equity securities of real estate investment trusts and real estate companies.

This Zacks sector – Real Estate product has a history of positive total returns for more than 10 years. Specifically, the fund has returned 4.2% over the past three years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

RRREX has an annual expense ratio of 0.76%, which is below the category average of 1.20%.

John Hancock Funds II Real Estate Securities Fund Class 1 (JIREX)aims for both long-term capital appreciation and current income. The majority of this fund’s assets are invested equity securities of REITs and real estate companies. This non-diversified fund’s investment in equity securities includes common stock, preferred stock and securities convertible into common stock.

This Zacks sector – Real Estate product has a history of positive total returns for more than 10 years. Specifically, the fund has returned 4.1% over the past three years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

JIREX has an annual expense ratio of 0.80%, which is below the category average of 1.20%.

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