Point of View with Mark Howard-Johnson and Sherry Rexroad

With the real estate market recovering since 2010, many investors have been asking: will the recovery continue, and what is the best way to gain exposure in a portfolio? BlackRock’s real estate securities experts, Mark Howard-Johnson and Sherry Rexroad, discuss how real estate investment trusts (REITs) offer a hybrid of the benefits of stocks and bonds with the potential for strong returns and dividend income, as well as a dose of diversification.

  • REITs offer the potential for competitive income and returns, as well as low correlation to stocks and can serve as an inflation hedge.
  • Many REITS have improved their financial health since the financial crisis, and have the potential to perform well in a growth economy.
  • REITs can contribute to every portfolio. Look for a manager with deep resources that seeks to deliver a portfolio of high quality, core real estate stocks.

"The unique characteristics of REITs make them compelling for most portfolios."

The BlackRock Real Estate Securities fund is actively managed and its characteristics will vary. Stock values fluctuate in price so the value of your investment can go down depending on market conditions. Investing in small- and mid-cap companies may entail greater risk than large-cap companies, due to shorter operating histories, less seasoned management or lower trading volumes. Non-diversification of investments means that more assets are potentially invested in fewer securities than if investments were diversified, so risk is increased because each investment has a greater effect on performance. Concentrating investments in single sector means that performance will be more susceptible to factors affecting that sector and more volatile than funds that invest in many different sectors. If interest rates rise, the value of convertible securities usually falls. Convertible securities are subject to the risk that the issuer will not pay interest or dividends and their market value may change based on their credit rating or the perception of their creditworthiness. A convertible security also is subject to the same risks as common stock.

The main risk of real estate securities is that their value may go down depending on economies, vacancy rates, interest rates, tenant bankruptcies, amount of new construction in an area, laws and regulations and real estate maintenance and improvement. The fund may use derivatives to hedge its investments or to seek to enhance returns. Derivatives entail risks relating to liquidity, leverage and credit that may reduce returns and increase volatility. Many real estate related securities issuers are highly leveraged, increasing the risk of such securities.

Carefully consider the Funds' investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds' prospectuses or, if available, the summary prospectuses which may be obtained visiting the iShares ETF and BlackRock Mutual Fund prospectus pages. Read the prospectus carefully before investing.

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