FRESX or FIREX: Which mutual real estate fund to buy?

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Investing in the real estate sector gives the portfolio stability, largely because the volatility of real estate prices is much lower than that of stocks. Investors willing to hold long-term positions should therefore consider real estate funds, as these provide stability and generate stable returns. This fund category also offers excellent protection against inflation and is a solid investment option.

The Real Estate Select Sector SPDR Fund (XLRE) has gained 26.6% over the year to date. An investment in mutual real estate funds therefore appears sensible from today’s perspective. Let’s take a look at two of the best funds in the field and see which one is a better investment.

Fidelity real estate investment portfolio FRESX

This fund seeks above-average income and long-term capital growth with reasonable investment risk. This nondiversified fund invests primarily in common stocks. The majority of FRESX’s assets are invested in the securities of companies primarily engaged in real estate and other property-related investments.

This sector real estate product has had positive total returns for over 10 years. Specifically, the fund’s return is 9.9% over a three-year period and 6.6% over a five-year period. Click here to see how this fund compares to its category and other # 1 and # 2 mutual funds.

The Fidelity Real Estate Investment Portfolio Fund has allocated its assets to the two largest groups since the last filing; Inter-bond and great value. In addition, Crown Castle International Corp. and Prologis, Inc. had the largest holdings in FRESX at the last filing.

This Zacks Mutual Fund Rank # 1 (Strong Buy) fund was launched in November 1986 and is managed by Fidelity. FRESX has an expense ratio of 0.74% and does not require a minimal initial investment.

Fidelity international real estate fund FIREX

The fund invests the majority of its assets in common stocks of foreign companies. The Fund typically invests in the securities of companies active in the real estate industry, as well as other real estate-related investments.

This sector real estate product has had positive total returns for over 10 years. Specifically, the fund’s return is 11.2% over a three-year period and 10% over a five-year period. Click here to see how this fund compares to its category and other # 1 and # 2 mutual funds.

Fidelity International Real Estate Fund has divided its assets into the two largest groups, Foreign Bonds and Foreign Stock, since the last submission. In addition, Vonovia SE and CK Asset Holdings Limited were the top holdings for FIREX when it was last submitted.

This Zacks Mutual Fund Rank # 1 (Strong Buy) fund was launched in December 2002 and is managed by Fidelity. FIREX has an expense ratio of 1.00% and does not require a minimum initial investment.

Conclude

While both FRESX and FIREX are buy-rated funds, on closer inspection we see that the latter is a clear winner. FIREX’s administrative and other operating costs are higher than FRESX’s, but the latter has historically achieved higher and more consistent returns compared to FRESX.

It should also be noted that FIREX offers lower risk compared to FRESX. FIREX has a 3 year beta of 0.69 versus 0.80 of FSREX. Therefore, FIREX is the fund to bet on because of its slightly lower risk and consistently higher returns.

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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.

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