5 Big Reasons to Own These 5 Small-Cap REITs
Yes, good things come in small packages – REIT investing is no exception – so here are 5 “Small-Cap” Real Estate Investment Trusts worth considering for your portfolio. But first, a (small) handful of reasons that I like Small-Cap REITs:
1. With Small-Caps, I can fish for bargains, and try to identify soon-to-be “big players” in an otherwise small-cap pond. It’s worth going where many analysts, “the Street,” and other investors often fail to look. I like looking for trends and finding them: the small-fry company on an upswing, the underdog racing past in victory, the seemingly newly-hatched “overnight” sensation whose business plan has been underway for a decade.
2. As a long-time REIT aficionado and analyst, I’m quite comfortable researching REITs for hours – and then collecting my dividends, especially as they grow over time, all while I simply hold the shares.
3. There are important guidelines and rules for successful Small-Cap REIT investing. With less volume of shares traded for a given ticker symbol, the price spread will typically be wider. Placing limit orders instead of market orders can help prevent your final price from getting attached to the higher (“ask”) side of the spread.
4. With lower volume, a more thinly-traded stock may not have enough supply when you want to buy – so again, patience is required.
5. With smaller company balance sheets, fewer and less diverse holdings, and oftentimes limited or narrower future prospects, it’s good to restrict your small-cap holdings to a smaller portion of your portfolio – often as “speculative” buys, and not to exceed a 1% holding for any one stock.
Look for my entire 21-stock Small-Cap Portfolio – and all of my REIT recommendations in the August Forbes Real Estate Investor newsletter, publishing Wednesday. (You can subscribe at the end of the article.) To whet your appetite – here are 5 Small-Cap REITs that can enhance your investments: