The Best Fidelity Real Estate Funds for Portfolio Diversification

Recent reports suggested that both mortgage activity and new housing starts are slowing, which may steer cautious investors away from real estate companies that are involved in the residential space. However, real estate stocks can continue to be attractive investments, as long-term interest rates continue to decline:


We highlight here two excellent Fidelity funds that can be used for portfolio diversification. The first is the Fidelity Real Estate Investment Portfolio (FRESX), which invests in large cap real estate companies, such as the Simon Property Group, Public Storage and Ventas. Lower interest rates will help these companies by lowering the borrowing costs for capital-intensive projects and will also make their yield more attractive compared to bonds.

The three-year chart below shows that the net asset value of FRESX peaked out a year ago, which was followed by price consolidation in the second half of 2013. As interest rates started to decline in January, FRESX started a new uptrend and continues to outperform the broad market indexes.


The second fund is the Fidelity Real Estate Income Fund (FRIFX), which we have highlighted before, as one the top income investments for 2014 (see article). FRIFX invests in debt obligations and preferred stock of Real Estate Investment Trusts (REITs) and currently provides an attractive 4.54% yield. The chart pattern is very bullish with FRIFX resuming its uptrend in January that has not been interrupted ever since:



Buy and sell signals are available at


3 thoughts on “The Best Fidelity Real Estate Funds for Portfolio Diversification

  1. Thanks, these funds certainly look appealing!
    I have a concerns that the decline in long-term interest rates may reverse itself a little bit. If rates were to back up to 38-39 (basis $TYX) what impact – if any – do you think that would have on the real estate funds presented here?

    • You have a very good point. Real estate investments and interest rates are not perfectly correlated. With other words, interest rates are only one of the many factors influencing the valuation and credit worthiness of the REITs that the mutual funds invest in. But you are right, investors will have to anticipate the direction of the interest rates before deciding to invest in these funds. My personal take is that $TYX continues to trend lower and that will contribute to making real estate investments attractive, but of course I can be wrong.

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