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A little clarity for your next decision.
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Investor WorkspaceA little clarity for your next decision.
By Jerry Baker
REITs have sometimes beaten the S&P 500 and sometimes trailed it, with the answer changing sharply by the period measured. For the five and ten years ended December 31, 2025, the FTSE Nareit All Equity REITs Index had lower annualized total returns than the S&P 500. A fair comparison includes dividends, uses matching dates, and separates an index result from what an investor actually earned.
“Real estate versus stocks” sounds clear until you ask what each side includes. A rental house, a private development fund, a mortgage REIT, and a listed apartment REIT have different risks and return measures. None should quietly stand in for all the others.
This guide compares listed U.S. equity REITs with a broad large-company U.S. stock index. Equity REITs generally own income-producing real estate. Mortgage REITs generally focus on financing. The SEC describes those business models and the differences between listed and nontraded shares. [1]
The S&P 500 represents leading large U.S. companies across industries. Its provider describes it as a large-cap market measure, not a portfolio made only of technology stocks or a complete measure of every U.S. business. [2]
Both benchmarks involve shares. We are not comparing an unlevered building appraisal with a stock account. That distinction matters when someone claims REITs behave exactly like a personally owned building.
The tables below stop at December 31, 2025. They use complete calendar years and matching multiyear windows. They do not present an unfinished 2026 return as if it were a full year.
Nareit publishes the FTSE Nareit return history and a monthly REITWatch report. Its January 2026 report includes data through year-end 2025 and places the REIT and S&P measures in the same comparison. [3]
That fixed date makes the numbers reproducible. It does not mean the market has stopped changing. Before using a later report, update both series to the same date and keep the same index definitions.
Also distinguish a calendar-year result from a trailing twelve-month result. January through December and July through June each cover one year, but they can give very different answers. A label that says only “one year” leaves an important question unanswered.
These are total returns, including dividends under the index methods. Figures are rounded to two decimal places. Nareit’s original annual table supplies the equity REIT figures; S&P’s December 2025 review confirms its own recent annual results. [4] [5]
| Calendar year | FTSE Nareit All Equity REITs | S&P 500 |
|---|---|---|
| 2022 | −24.95% | −18.11% |
| 2023 | 11.36% | 26.29% |
| 2024 | 4.92% | 25.02% |
| 2025 | 2.27% | 17.88% |
Over these four years, the S&P 500 did better in each calendar year. That is a specific historical finding. It is not proof that every REIT lost money, that every stock fund earned the index return, or that the next four years will follow the same pattern.
A positive year also does not erase every earlier loss. After a large decline, a smaller percentage gain starts from a lower balance. Check the compounded result rather than counting the number of green years.
The following annualized total returns all end December 31, 2025. Each figure describes the constant yearly growth rate that would produce the period’s compounded index result. It is not a promise of a payment each year. [3]
| Period | FTSE Nareit All Equity REITs | S&P 500 |
|---|---|---|
| 5 years | 4.85% | 14.42% |
| 10 years | 5.77% | 14.82% |
| 25 years | 8.96% | 8.83% |
The S&P led over the five- and ten-year windows. Equity REITs were slightly ahead over the twenty-five-year window. All three observations can be true. They begin at different times and include different market paths.
A twenty-five-year figure does not erase a difficult recent decade. A recent decade does not erase older history. Use several windows to see how sensitive the conclusion is to the start date, rather than selecting the one that makes a preferred investment look best.
Using the rounded five-year rates above, a hypothetical $10,000 growing at 4.85% annually for five years reaches about $12,672. At 14.42%, it reaches about $19,611. Those amounts illustrate the reported rates before investor-level costs and taxes.
The calculation is starting value multiplied by one plus the annual rate, raised to the number of years. It assumes no added deposits or withdrawals. Because the published rates are rounded, this reconstruction may differ slightly from a calculation using full index values.
It also assumes the dividends remain invested as the total-return method provides. An investor who takes distributions to pay living expenses should not expect the same ending investment balance plus all those distributions again.
Keep the example separate from a forecast. Applying a past rate to the next five years is an assumption, not evidence that the future account will reach that amount.
Price return measures changes in the share or index price. Total return also accounts for distributions under its stated reinvestment method. A comparison that includes REIT dividends but excludes S&P dividends favors one side before the analysis even begins.
S&P reported a 2025 price gain of 16.39% and a total return of 17.88%. Those are two valid measures with different meanings. They are not conflicting reports of the same result. [5]
For a simple hypothetical share, suppose you pay $50, receive $2 of cash, and sell for $49. The price return is negative 2%. With the cash included and no reinvestment, the simple total return is positive 2%, before tax and costs.
A reinvested index calculation can differ because the distribution buys more exposure at the applicable price. Check the method before recreating an index by adding a year-end dividend yield to a price chart.
Suppose an investment gains 50% in one year and loses 50% in the next. Its simple average annual return is zero. Yet $100 becomes $150 and then $75. The two-year total loss is 25%.
The annualized compound return is about negative 13.4%. That is the constant annual rate that takes $100 to $75 over two years. It tells a different story from adding the yearly returns and dividing by two.
This matters when reading a sales chart. Ask whether “average annual return” means an arithmetic average, a compound rate, an internal rate of return, or another calculation. The words alone do not establish the method.
For the same reason, do not add the four yearly returns in the earlier table to estimate four-year growth. Multiply the annual growth factors. Each year starts with the balance left by the prior year.
A period beginning near a market high has a different path from one beginning after a major decline. Moving the start date by a year can add or remove an unusually strong or weak result.
That does not make every selected period dishonest. A retirement date, fund launch, or planned holding period may provide a good reason for using certain dates. The reason should be visible rather than chosen after seeing which period looks most favorable.
Ask for rolling periods when a broad claim rests on one window. A rolling ten-year study would evaluate many ten-year windows, not just the one ending today. It should state the frequency, dates, reinvestment rules, and treatment of overlapping observations.
This guide does not invent a rolling-period success rate. The fixed-period tables support only the stated comparisons. A claim that REITs won a certain share of all possible periods would need a separate, complete calculation.
Two investments can reach the same ending value by very different routes. One might rise steadily, while another suffers a large decline before recovering. If you need cash during that decline, the path can matter as much as the final result.
Review drawdown, which measures a fall from a prior peak, alongside total return. Also consider volatility, the size and timing of distributions, and the time required to recover. A calendar-year return is not the same as the largest loss within that year.
A negative annual result can hide a deeper midyear decline followed by a recovery. A positive year can contain a severe drop. Do not use the year-end table as a complete account of risk.
The SEC explains that listed REIT shares face market risk. A property business does not make its stock a cash substitute. Money needed soon deserves a plan that does not depend on a favorable sale price. [1]
A larger distribution can help an investor who needs cash. But the money should be evaluated with changes in value and the company’s ability to keep paying. A falling price can also make a quoted yield look unusually high.
Suppose one hypothetical investment pays 6% while its value falls 12%. Another pays 2% while its value rises 5%. Ignoring reinvestment and other timing effects, the first has a negative 6% simple total return and the second a positive 7%.
That example does not say lower yield is always better. It shows why yield answers only part of the question. Read the source of distributions, company cash flow, capital needs, and any tax classification.
The REIT distribution test uses a defined taxable-income calculation. It does not require a fixed yield on your purchase price or guarantee that a dividend is sustainable. Tax qualification and investment performance are separate issues. [6]
You cannot put money directly into an index. A fund that tracks it has its own fees, trading activity, tax treatment, and tracking results. An actively managed fund may own different investments and follow a different strategy.
An actual iShares REIT fund prospectus distinguishes its returns from the benchmark’s returns. It also states that the index reflects no deduction for fees, expenses, or taxes. That is an example of the distinction to look for, not a recommendation of that fund. [7]
Compare the exact share class and return basis. A fund’s market-price return can differ from its net asset value return. Sales charges, account charges, and advisory fees may add another layer depending on the product and account.
Read the performance footnotes before comparing two fact sheets. A difference caused by fees is useful information. A difference caused by mismatched dates or return methods is a comparison error.
The tables here show index results, not your after-tax return. An investment that pays more current income can create a different tax pattern from one that leaves more of its return in an unrealized price gain.
REIT distributions can have different tax categories. Your result depends on the actual distribution, account type, holding period, income, and state rules. Do not apply one flat tax rate to every REIT payment or assume every stock dividend receives the same treatment.
The fund prospectus’s after-tax example uses specified federal assumptions and excludes state and local taxes. It warns that actual outcomes differ and that those figures do not fit tax-deferred accounts in the same way. [7]
For a real decision, ask for an account-specific comparison using the same starting dollars and time horizon. Keep federal taxes, state taxes, fees, and withdrawals visible so the analysis does not hide the assumptions that drive its conclusion.
Some listed REITs can be included in broad stock indexes. Owning a broad stock fund may already provide some real estate exposure. Adding a separate REIT fund changes the weight of that exposure rather than introducing an entirely unrelated asset.
Check the actual holdings. Different REIT funds may own many of the same companies, while different broad funds may track nearly identical indexes. A longer list of fund names does not automatically produce a more varied portfolio.
The SEC’s asset-allocation guidance encourages investors to consider their time horizon, tolerance for risk, and diversification. Those questions remain useful even when one index has recently outperformed another. [8]
Do not turn a historical return contest into an all-or-nothing choice. A portfolio decision should consider what exposure you already have, including directly owned property, employment, and other investments tied to the same economy.
REIT property types include housing, industrial buildings, health care facilities, shopping space, storage, hotels, and other uses. Their tenants, lease terms, costs, and debt schedules differ. The broad index blends those results. [9]
That blend can be useful as a benchmark. It is not a description of any one company’s business. A concentrated sector holding might have very different returns and risks even when it shares the REIT tax label.
Ask whether an investment should be compared with a broad equity REIT index or a more specific sector benchmark. Use the broad index for overall context, but do not ignore a strategy mismatch when judging a manager.
The same caution applies to the S&P. Its industry weights and member companies can change. Historical index results reflect the index’s rules over time, not a frozen list of today’s largest names held unchanged for decades.
A private or nontraded real estate investment may have different liquidity, fees, leverage, property concentration, and valuation methods. A listed equity REIT index cannot establish what that offering will earn.
The SEC warns that nontraded REITs may have limited repurchase programs and substantial restrictions on access to cash. An estimated value may also update less often than a listed share price. [10]
Comparing a private fund’s projected internal rate of return with a listed index’s past compound return mixes both forecast and history, as well as different calculations. Ask for comparable actual cash flows and dates where available.
If the private offering has no completed history, say so. Its business plan can still be reviewed, but a projection should remain a projection. A broad industry chart does not fill the missing evidence.
An index describes a market path without your personal spending schedule. Your account may receive new contributions, pay out cash, or sell shares to cover bills. Those events can change how the same sequence of market returns affects you.
Consider two hypothetical years with a 20% loss and a 25% gain. With no cash taken out, either order turns $100 back into $100. Now assume you withdraw $10 after the first year.
If the loss comes first, $100 falls to $80. After the withdrawal, $70 remains. A 25% gain then brings the account to $87.50. If the gain comes first, $100 becomes $125, then $115 after the withdrawal. A 20% loss leaves $92.
Both paths include the same yearly returns and the same $10 withdrawal. The ending balances differ because the withdrawal changes the amount exposed to the second year. These are simple teaching assumptions with no taxes, fees, or dividend detail.
This is one reason an income plan needs more than an average return. List the dates and amounts you expect to spend. Test an early decline and a delayed recovery, not just a smooth annual growth line.
When comparing your account with a benchmark, ask whether the report uses a time-weighted or money-weighted return. The first seeks to remove the effect of external cash flows; the second reflects their timing and size. Neither should be silently substituted for the other.
Before accepting a performance claim, write down the index name, start date, end date, currency, and return method. Identify whether income is reinvested and whether the figures include taxes and every relevant fee.
Then ask what happened between the endpoints. Could you have held through the decline without selling? Would the income have met your needs? Did the chosen period start after a major loss or end after a large rebound?
Finally, separate past evidence from the current decision. Review today’s price, business risks, debt, and role in your finances. A past winner can become expensive, and a past loser can remain weak. Neither deserves a purchase based only on its place in a table.
The answer depends on the period and index. Through December 31, 2025, the S&P led the five- and ten-year comparisons here, while equity REITs were slightly ahead over twenty-five years. Use matching total-return periods. [3]
Yes. The comparison tables use total returns under the index methods. Price-only returns exclude the dividend component and should not be mixed into one side of a total-return comparison.
No. It tracks listed company shares, with company debt, management, market pricing, and index rules. Direct ownership has different control, costs, liquidity, and valuation practices. The two may share property exposure without producing identical results.
No. Yield does not include the full change in value, and a high yield may reflect a falling price. Examine the source and durability of payments alongside total return and risk.
No. An annualized return smooths the entire period into one compound rate. Actual yearly results can vary widely, including losses. The historical rate is not a promised distribution or forecast.
Fees, trading, cash balances, tracking differences, taxes, and other factors can affect results. Check the share class and return method. An index is a benchmark, not a product you can buy directly.
A past ranking alone is not enough. Review your goals, existing exposure, current valuations, liquidity needs, and tax costs. Selling after weak results and buying after strong results can create risks of its own.
No. Listed index history does not establish the outcome of a private offering. Evaluate its actual properties, financing, fees, restrictions, and manager. Clearly separate any forecast from completed investment results.
Educational information, not an offer or a personal tax, legal, or investment recommendation. Examples are hypothetical and omit stated adjustments. Tax treatment depends on your facts and current law. Review your transaction with your CPA, attorney, and qualified intermediary. Real estate investments can lose value and may be illiquid.
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