Investing in the real estate sector adds stability to one’s portfolio, mainly because volatility in property prices is far less than what is experienced by stocks. So, investors willing to hold long-term positions would do well to consider real estate mutual funds as these add stability and bring steady returns. This category of funds also offers superior protection against inflation and is a solid investment choice.
Meanwhile, the Real Estate Select Sector SPDR Fund (XLRE) has gained 1.7% 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.
MFS Global Real Estate Fund Class A MGLAX
This fund aims for total return. The fund invests majority of assets in equity securities of U.S. and foreign real estate-related investments.
This Sector-Real Estate product has a history of positive total returns for over 10 years. Specifically, the fund’s returns are 6.6% over a three-year period and 7.7% 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.
MFS Global Real Estate Fund Class A, as of the last filing, allocates its assets in the top two major groups; Intermediate Bond and Small Value. Further, as of the last filing, Prologis (NYSE:PLD) Inc. and Goodman Group were the top holdings in MGLAX.
This Zacks Mutual Fund Rank #1 (Strong Buy) fund was incepted in March 2009 and is managed by MFS. MGLAX carries an expense ratio of 1.23% and requires a minimal initial investment of $1,000.
Fidelity International Real Estate Fund FIREX
This fund invests the majority of its assets in common stocks of non-U.S. companies. The fund normally invests in securities of companies engaged in the real estate industry as well as other real estate related investments.
This Sector-Real Estate product has a history of positive total returns for over 10 years. Specifically, the fund’s returns are 7.9% over a three-year period and 8.7% 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 International Real Estate Fund, as of the last filing, allocates its assets in the top two major groups, Foreign Stock and High Yield Bond. Further, as of the last filing, Vonovia SE and Mitsubishi Estate (OTC:MITEY) Co., Ltd. were the top holdings for FIREX.
This Zacks Rank #1 (Strong Buy) fund was incepted in December 2004 and is managed by Fidelity. FIREX carries an expense ratio of 1.00% and requires a minimal initial investment of $0.
To Conclude
While both MGLAX and FIREX are buy-rated funds, upon taking a closer look, we find that the latter is a clear winner. Not only are the administrative and other operating expenses of MGLAX higher than FIREX’s, the latter has a history of providing higher and more consistent returns compared to MGLAX.
It should also be noted that FIREX offers lower risk compared to MGLAX. FIREX has a three-year beta of 0.67 compared with MGLAX’s 0.70. Therefore, FIREX is the fund that one must bet on given its mildly lower risk and consistently higher returns.
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