Adding real estate to your investment portfolio can be an excellent way to generate strong returns and hedge against market downturns or inflation. If you’re not interested in purchasing and managing a property on your own, though, there are alternatives. Both REITs and platforms like Fundrise make real estate investing easier and more accessible to investors. However, while Fundrise may seem very similar to basic REITs, these two investment options have important differences to note. Here’s what you need to know.
With all the options you have to invest in real estate assets, it’s only makes sense to work with a financial advisor as you pick such securities.
What Is Fundrise?
Fundrise, which is a type of REIT, is an online platform that allows investors to purchase shares of real estate interests. Through Fundrise, investors are able to diversify their portfolio, adding low-cost real estate investments without the hassle of buying, renovating or managing those properties.
This also makes real estate investing possible for more people. Rather than requiring the full capital necessary to purchase a property, Fundrise has lower minimums that make real estate investing accessible to newer or lower-budget investors.
Fundrise operates as a crowdfunded business model. Investors purchase shares of preset portfolio strategies; their funds are then diversified across various funds within that strategy. Fundrise uses this capital to purchase, renovate, market and occupy a range of property types, while charging investors an annual advisory fee and a management fee.
Over time, the investment properties held within Fundrise’s portfolios may gain value and provide income. In turn, investors may see their own portfolio’s value grow, and may even receive quarterly dividends as a result.
How eREITs Work
One of the simplest ways for investors to add real estate to their portfolio is through a real estate investment trust, or REIT. Buying shares of a REIT is similar to buying shares of other investments such as mutual funds, exchange-traded funds (ETFs) or even individual stocks.
When investing through Fundrise, investors are purchasing shares of private equity REITs, or “eREITs,” which is a trademarked term. These investments provide capital for various residential and commercial real estate projects, offering investors a return on the property as it increases in value.
Equity REITs can be privately or publicly traded; in the case of Fundrise, their eREITs are open to all investors but are not traded on an exchange. There are no brokers and no sales commission for investors who buy eREITS; they are sold directly by Fundrise.
Fundrise vs. REIT Investing
“REIT” spelled out in block letters
Investing in REITs – especially publicly traded REITs – is a lucrative option for many investors. Not only do these investments traditionally perform well, but the majority of the time they even boast a higher return yield than the S&P 500. The eREITs offered through Fundrise are privately traded investments, however. This means that they may not boast the same returns or have the same benefits as public REITs purchased through a brokerage account.
With that said, Fundrise REITs usually cover a wide range of investment types. Because of this, they may help hedge against market downturns better than some specialized REITs or individual real estate purchases.
Which is Better?
So, between investing through Fundrise or investing in public REITs, which is better? Well, the difference will really depend on your goals and priorities as an investor.
Here’s a look at some of the important differences between the two REIT investment methods:
Fundrise offers low investmentminimums. To get started investing through Fundrise, investors are only required to make a minimum investment of $10. Other REITs may have significantly higher requirements – sometimes in the four- or five-figure range – especially when it comes to non-exchange traded or private REITs.
Fees may be higher with FundriseeREITs. Fundrise charges investors a total of 1% in annual fees. This includes a 0.15% advisory fee and a 0.85% asset management fee. The typical publicly traded REIT charges fees around 50 basis points, or 0.50%, annually. This makes Fundrise two times more expensive than public REITs, on average.
Private REITs don’t offer the same liquidity as publicREITs. Generally, REITs operate best as a long-term investment. However, if you ever need to liquidate public exchange-traded REITs, you can often do so fairly quickly through your brokerage platform. Fundrise REITs, however, are private and non-traded, which means that your shares could take much longer to sell.
The Fundrise platform can be simpler touse. There are many different REITs to choose from, but finding the one that works best for your goals and investment timeline can be tricky, depending on where and how you invest. Fundrise offers preset investment portfolios, enabling investors to pick the one that suits their goals. Any funds invested will be disbursed according to that portfolio’s allocation, without the need to shop around or do much digging.
All REITs are required by the IRS to pay out at least 90% of their taxable income to investors. These are disbursed in the form of dividends. While dividends (and overall returns) are never guaranteed, this requirement can make REITs an excellent choice for investors seeking passive income streams.
The Bottom Line
Two REIT investors
Standard REITs can be publicly traded, privately traded or public non-traded. Fundrise REITs are private, and thus may be somewhat illiquid, may be simpler for some investors and only require an initial investment of $10. Investors can just choose the preset portfolio that best matches their goals. Fundrise platform fees are 1% annually, which is higher than the average public REIT fee. While the Fundrise investment model is pretty simple, return yields may be lower than public REITs, depending on the portfolio you choose.
Tips for Investing
Consider working with a financial advisor as you weigh the pros and cons of various real estate assests. Finding a financial advisor doesn’t have to be hard. SmartAsset matching tool matches you, in just a few minutes, with professionals in your area. If you’re ready, get started now.
REITs can make a key part of your retirement nest egg. Planning for retirement requires knowing how much you’ll need to sustain your lifestyle once you’re done working. SmartAsset’s free retirement calculator can give you an idea of how much money you need to save.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
