03/12/2021 | by

The third round of stimulus checks should be arriving in bank accounts shortly, and the question is: what are people going to do with them?

According to the findings of a recent Deutsche Bank survey, a large percentage will be filtered directly into the stock market.

A recent CNBC article highlighted the findings:

“An online survey of 430 investors who use online broker platforms found that half of respondents between 25 and 34 years old plan to spend 50% of their stimulus payments on stocks.

…18- to 24-year-olds involved in the survey planned to use 40% of any stimulus checks on stocks, and 35- to 54-year-olds surveyed planned to use 37% of their checks on equity market investment. The over-55s surveyed said they’d put only 16% into stocks.”

For these younger investors, this is the perfect time to make sure their portfolio is properly allocated, which would include exposure to real estate.

Commercial real estate is a core asset class with unique investment attributes and return drivers, but purchasing commercial property is financially prohibitive for a majority of Americans. This is where REITs come into play.

Investments in REITs are investments in real estate, providing the same long-term real estate returns and diversification benefits. They offer the same exposure to commercial real estate with the affordability and liquidity of the stock market. This is the reason that 83% of financial advisors in the U.S. recommend REITs.

What is the proper allocation of REITs in a well-diversified portfolio?

Many investors believe a sufficient portfolio allocation to REITs is between 5% and 15%. Even amid the pandemic, financial advisors continue to counsel their clients to include REITs in their portfolios. According to a Nareit-sponsored survey conducted by market research firm Chatham Partners, 92% of financial advisors will maintain or increase their recommendation of REITs to their clients in the next one to three years.

Younger investors are set to be a driving force in the stock market, and as they look to invest some of their stimulus money, they should take into account the diversification, income, and competitive, long-term investment returns a proper allocation of REITs will bring to their portfolios.

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