The benefits of adding iShares S&P/TSX Capped REIT Index Fund (XRE) to your portfolio

Our very last investment was little (less than 800$), but its a 4 stars Morningstar Canada investment: iShares S&P/TSX Capped REIT Index Fund (XRE). I currently own 54 units of iShares S&P/TSX Capped REIT Index Fund (XRE).

With a net asset value of more than 1 billion of dollars (that's right, 1 billion!), the iShares S&P/TSX Capped REIT Index Fund (XRE) offer a great exposure to the Canadian real estate investment trust, commonly known as REITs. The iShares S&P/TSX Capped REIT Index Fund (XRE) offer exposure to the financial sector (99.95%), a sector that is still strong in Canada despite the worldwide recession. Personally, my overall portfolio didn't have a high exposure to the financial sector. As financial stocks, I hold Bank of Nova Scotia (BNS), Davis + Henderson Income Fund (DHF.UN) and Sprott Inc. (SII). Before iShares S&P/TSX Capped REIT Index Fund (XRE), I wasn't involve in the real estate sector - but now I am!

If just like me, you worry about diversification (like enough is never enough right) and you want to make sure to invest in a financial product that is already ultra-diversify by itself? Well, the iShares S&P/TSX Capped REIT Index Fund (XRE) may be a good option for you!

When investing in the iShares S&P/TSX Capped REIT Index Fund (XRE), you directly investing in major players of the Canadian real estate sectors:

RioCan REIT (REI.UN): 24.68%
H&R REIT (HR.UN): 12.64%
Canadian REIT (REF.UN): 9.37%
Calloway REIT (CWT.DB.B): 8.31%
Boardwalk REIT (BEI.UN): 7.13%
Primaris Retail REIT (PMZ.UN): 5.95%
Dundee REIT (D.UN): 5.66%
Canadian Apartment Properties REIT ("CAPREIT") (CAR.UN): 5.40%
Cominar REIT (CUF.UN): 5.05%
Chartwell Seniors Housing REIT (CSH.UN): 4.70%

Sound interesting? Well, the iShares S&P/TSX Capped REIT Index Fund (XRE) trades on the Toronto Stock Exchange. Looking for an investment for your 2010 RSP? Good news: the iShares S&P/TSX Capped REIT Index Fund (XRE) can be hold inside a RSP register account.

In reason of its high exposure Real Estate Investment Trust (REIT), I probably won't increase the number of units that I hold in the iShares S&P/TSX Capped REIT Index Fund (XRE). REITs are new for you to? According to Investopedia, REIT is "A security that sells like a stock on the major exchanges and invests in real estate directly, either through properties or mortgages". Companies such as RioCan REIT (REI.UN) and H&R REIT (HR.UN) are involve in the real estate through different activities. And because of their direct participation in the real estate sector, the REITs, receive a special tax considerations.

iShares S&P/TSX Capped REIT Index Fund (XRE) can be a good investment to hold in a non-registered account. The iShares S&P/TSX Capped REIT pays a monthly dividend known as a monthly cash distribution. As example, for the month of November 2010, the monthly cash distribution for the iShares S&P/TSX Capped REIT Index Fund (XRE) was of 0.06175$ per unit.

It won't represent that much of a dividend for us - only 3.3345$ per month - but still that more than enough to purchase a medium coffee at Second Cup. Merry Christmas!