REITs have attracted investors looking for a higher yield than can be found in the bond market. Previously, REITs have been included inside the financial sector in S&P 500, but will now be their own sector. This milestone change is slated to occur September 1, 2016.
Real Estate stocks have been included with institutional financial firms and insurance companies since 1999, but the real estate sector has shown increasing demand and now deserves its own classification due to its diverse nature that is different from the rest of the financial sector. Mortgage REITs will however remain with the financial sector. REITs with substantial NNN holdings include Realty Income (NYSE:O) and Kimco (NYSE:KIM).
This will create a new benchmark for investing in commercial real estate. The S&P 500 Index itself is weighted based on its components, market capitalizations, so creating another sector will have no net effect overall. The REITs sector now has a $596.28 billion market cap and will be the 9th largest sector making up 3% of the S&P 500.
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