WICHITA, KS (wichitaksrealty.news) Big Changes are coming. Very big changes. Since 1999, the SP500 has been comprised of ten sectors. One of the sectors will be split into two, creating 11 total broad sectors in the SP500. We’re talking about the removal of REITs, or Real Estate Investment Trusts from the Financial Sector and their addition as a stand alone sector. This move will remove an estimated 20 percent from the financials sector and will make up roughly 3.1 percent of the total index. This will make the REIT sector bigger than the utilities and telecom sector and even the materials sector.
According to the National Association of Real Estate Investment Trusts, REITS have around $1.1 trillion market cap. Due to its size, deserving of its own sector. One of the reasons for its size is investors seeking investment income and yield.
In essence, a REIT is an investment vehicle which allows investors to buy into pools of real estate. Some even offer important and useful tax considerations. It should be noted that this move will assist in tracking the REIT sector and also make investing in vehicles that track the sector easier. “Rebalancing” by portfolio managers to allocate their portfolios to mirror the sectors will most likely happen, as well. As stated, this is the first change in the SP500 sectors since 1999. Well before many events that have affected the real estate landscape, the dot com bubble and bust, 9-11, and the financial crisis of 2008.
This is something investors in all sorts of real estate, particularly commercial assets, will want to watch.