Want to take advantage of opportunities in the real estate recovery, but not quite ready to purchase another mansion?
JP Morgan Private Bank says it has launched a $100,000-minimum separately managed account designed to take advantage of the real estate upturn. The fund is limited to private banking clients. Fees, which JP Morgan declined to disclose, are based on the size of the investment. However, separately managed account fees average 1.67 percent, according to the latest survey by Cerulli Associates, Boston. In addition, this fund is high risk. It owns only 15 to 30 stocks concentrated in one industry. So you wouldnt want to devote any more than about 5 percent of your holdings to it, indicates Greg Walker, Palm Beach-based JP Morgan Private Bank investment specialist.
Youll also want to consider the tax consequences of owning the fund with your accountant both under the current tax code and amid a threat of higher taxes next year.
Nevertheless, Walker notes, it could well be time to reverse your doomsday view of the housing market. Housing starts this year already are up around 7 percent, he said. The Samp;P Homebuilders Select Industry index was up more than 35 percent this year at this writing. And the Samp;P 500 Home Improvement Retail Sub Industry index, which includes Lowes and Home Depot, was up more than 26 percent.
The JP Morgan separately managed account kicked off in March and has not yet released performance data.
Its shocking that the housing and housing related industries havent contributed to GDP in six years until this year, Walker says.
The JP Morgan fund focuses on trading stocks in three stages of real estate.
Theres the rehabilitation stage. This includes stocks of materials companies that deal with home improvement, such as Lowes and Home Depot. It also includes investments in Real Estate Investment Trusts, securities that invest in properties and/or mortgages.
The building phase includes publicly traded stocks of realty brokers, home builders, companies that deal in real estate insurance and inspections, and often, regional banks.
The boom phase, Walker says, includes materials companies such as lumber, and consumer durables such as washers and dryers.
On the national level, it finally is cheaper to own property than to rent, Walker says. Specifically, were looking to exploit this theme by this portfolio.
There are many other ways to invest in real estate without receiving calls in the middle of the night from irate tenants. Among those: Real estate exchange-traded funds, real estate mutual funds and real estate investment trusts. But regardless of which real estate investment you choose, investigate the risks, costs, tax ramifications, conflicts of interest and performance ? both in up and down markets.
Source: http://www.fitnessfoundation.org/new-fund-trades-in-real-estate-related-stocks/
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