Buy a Rental ETF
Although the options are fewer in the exchange-traded fund arena, investments like the SPDR Dow Jones Wilshire REIT ETF (NYSE:RWR) indexes U.S. real estate much like REIT mutual funds, and also boasts a nice dividend yield over 3%. ETFs also are very flexible, so it’s easy to sell these funds and redeem your investment if you wish.
Buy Individual REIT Stocks
If you don’t want the diverse play of a fund or ETF — either because you have identified better growth options or individual companies with better yields — then consider adding specific real estate investment trusts to your portfolio. For instance, Simon Property Group (NYSE:SPG) has topped both the broader market and many REIT funds with its 13% gains so far in 2011. Then there’s Ventas (NYSE:VTR), which boasts a nearly 5% dividend yield. If you want to weight your portfolio toward these options, forgo a fund and jump right into the REITs.
Buy a Rental Property
This is the most direct play of all. If you are handyman willing to suffer service calls or a thorough fact-checker willing to screen applicants to ensure your tenant doesn’t trash the place, you always can consider buying a property and renting it out. In some markets, the rental rate would be on par with your mortgage payment — meaning that if the refrigerator doesn’t go bust, you essentially have zero costs as someone else pays the bank and you enjoy the equity built over time in the property. Of course, real estate is highly illiquid these days, so don’t expect to get that investment cash back quickly if you need it.
Jeff Reeves is the editor of InvestorPlace.com. As of this writing, he did not own a position in any of the aforementioned stocks. Write him at firstname.lastname@example.org, follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook.