It’s pretty much impossible to find a pure real estate mutual fund out there. After all, what would you do if you owned 100 pieces of property, then a big portion of clients went to withdraw funds while real estate was tanking? Owning property isn’t the kind of liquid investment strategy that can be applied to mutual fund investing.
But real estate investment trusts, or REITs, are a common way to play real estate indirectly. These are big property owners that could either be apartment operators, commercial real estate companies or even a timber or energy producer that happens to own a lot of acreage. They’re also income-hunter favorites because REITs are required to pay out 90% of all taxable income to investors.
A variety of mutual funds invest in REITs, but one of the standouts is the CGM Realty Fund (MUTF:CGMRX). The portfolio manager is Ken Heebner, who is one of Wall Street’s top investors. But he also is a quick trader, which can mean CGMRX can experience lots of volatility. Still, over the long haul, CGM Realty’s results have been impressive.
For the past decade, CGMRX has posted an average return of about 10% — even across the worst housing downturn in history. CGMRX also sports a lean 0.88% expense ratio with no load.