Real-estate funds in your portfolio: high returns and low correlation to other asset classes make these funds good asset-allocation tools. (Mutual Exclusives).(Statistical Data Included)

Research, May, 2002 by Norton, Chip

OUR LARGEST ASSET IS USUALLY our home, but when we are paying our monthly mortgage we usually don't think of it as our largest investment -- we think of it as our largest expense. However, the reality is that our home and real estate in general are excellent investments. Like any other investment though, real estate moves in cycles. Over the last year, real-estate mutual funds have been the best performing sector after precious metals and small-cap value funds. Ending February, the average real-estate fund produced a 12-month return of almost 13 percent compared to the -9.5 percent of the S&P 500. And in March, the returns continued to pile up. With all this return now built in, many question whether these funds have a place in your portfolio going forward. If you are...