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Real Estate Investment Trusts or REITs are a specialized form of equity that allow investors to own a portion of a group of real estate properties, although many investors think of them as an alternative to bonds.

Expanded Definition

Granted special tax status by the Internal Revenue Service, REITs pay out at least 90% of their earnings in the form of dividends to shareholders, often offering healthy dividend yields of the same magnitude as bonds. Furthermore, as REITs acquire more property and increase the value of the properties they own, the value of the equity may increase as well, providing a more attractive total return.

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