Does real estate have a place in the investment portfolio of tomorrow?

The diversification benefits of investing in real estate from a conceptual standpoint are identified. Subsequently, two ways of investing in real estate, either directly in unsecuritized real estate or in securitized real estate, are examined. On a practical level, a number of difficulties arise when investing directly in real estate. A seemingly attractive alternative is to buy into securitized real estate in the form of real estate investment trusts (REITs). However, after examining the characteristics and behavior of REITs, they act more like stock than real estate. Thus, unsecuritized real estate should be included in one's portfolio to reap the diversification benefits, but only if one can afford this strategy.