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FRESX or FIREX: Which Real Estate Mutual Fund to Buy?

Investors willing to hold long-term positions would do well to consider real estate mutual funds as these bring steady returns.

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This story originally appeared on Zacks

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.

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Meanwhile, the Real Estate Select Sector SPDR Fund (XLRE) has gained 26.6% in the year to date period. 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.

Fidelity Real Estate Investment Portfolio FRESX 

This fund aims for above-average income and long-term capital growth, consistent with reasonable investment risk. This non-diversified fund invests primarily in common stocks. The majority of FRESX’s assets are invested in securities of companies principally engaged in the real estate industry and 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 9.9% over a three-year period and 6.6% 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 Real Estate Investment Portfolio fund, as of the last filing, allocates its assets in the top two major groups; Intermediate Bond and Large Value. Further, as of the last filing, Crown Castle International Corp. and Prologis, Inc. were the top holdings in FRESX.

This Zacks Mutual Fund Rank #1 (Strong Buy) fund was incepted in November 1986 and is managed by Fidelity. FRESX carries an expense ratio of 0.74% and requires no minimal initial investment.

Fidelity International Real Estate Fund FIREX

The fund invests the majority of its assets in common stocks of foreign 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 11.2% over a three-year period and 10% 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 Bond and Foreign Stock. Further, as of the last filing, Vonovia SE and CK Asset Holdings Limited were the top holdings for FIREX.

This Zacks Mutual Fund Rank #1 (Strong Buy) fund was incepted in December 2002 and is managed by Fidelity. FIREX carries an expense ratio of 1.00% and requires no minimal initial investment.

To Conclude

While both FRESX and FIREX are buy-rated funds, upon taking a closer look, we find that the latter is a clear winner. The administrative and other operating expenses of FIREX higher than FRESX’s, but the latter has a history of providing higher and more consistent returns compared to FRESX.

It should also be noted that FIREX offers lower risk compared to FRESX. FIREX has a three-year beta of 0.69 compared with FSREX’s 0.80. Therefore, FIREX is the fund that one must bet on given its mildly lower risk and consistently higher returns.

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