What is the primary function of a Real Estate Investment Trust (REIT)?

The primary function of a Real Estate Investment Trust (REIT) is to invest in a diversified portfolio of real estate. REITs are companies that own, operate, or finance income-producing real estate across a range of property sectors. By pooling investors' capital, REITs allow individuals to invest in large-scale, income-generating real estate without having to directly own the properties themselves. This diversification helps mitigate risks associated with real estate investment, as the performance is not tied to a single property but rather to a collection of various properties.

Investors benefit from the income generated by the properties, typically through rental payments or interest, while also participating in potential appreciation of the property values over time. This structure not only offers a way for investors to gain exposure to real estate but also brings liquidity to the real estate market since many REITs are publicly traded on stock exchanges.