S&P 500 gives real estate a sector all its own

Gigi Douban Sep 19, 2016
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Real estate had been a category previously grouped with the financial sector. Justin Sullivan/Getty Images

S&P 500 gives real estate a sector all its own

Gigi Douban Sep 19, 2016
Real estate had been a category previously grouped with the financial sector. Justin Sullivan/Getty Images
HTML EMBED:
COPY

As of today, there’s a new kid on the block in the world of S&P 500 sectors: real estate. Until now,  the S&P Dow Jones Indices had lumped real estate in with the financial sector. This makes real estate the 11th sector in the S&P 500, which rarely adds categories. But experts say it was time.  

Imagine the S&P is like that grandmother who pinches your cheeks and tells you how big you’ve gotten. Also, you’re the homecoming queen. Everyone wants a piece of you. Grandma, or the S&P, talks your parents into giving you your very own room.

Since 2001, “this is the first time we have added a new sector,” said David Blitzer, chairman of the Index Committee at S&P Dow Jones Indices. He said S&P and indexing rival MSCI realized something: More and more people are investing in real estate investment trusts. So they split them off from the financial sector.

“Because it’s big enough and important enough, and enough people want to know about it,” he said. 

Elliot Eisenberg, president of the the economic consultancy GraphsandLaughs, said real estate has been growing over the last few decades, but it really took off recently.

“Last couple of years, as interest rates have really gone into the ground, there’s been this searching for yield,” he said. 

Real estate investment trusts have high yields because they pay investors 90 percent of their earnings in the form of dividends. 

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