Top 5 Real Estate Mutual Funds - Best of Funds

Investing directly in the real estate sector may appear to be an expensive proposition for most investors. This is where mutual funds come in, offering a cost effective method of investing in this industry. Real estate funds also offer significant protection against inflationary pressures. Research has shown that they perform better on this front compared to gold and other precious metals. Including funds from this sector in a well diversified portfolio helps increase returns while reducing the risk factor as a whole.

Below we will share with you 5 top rated real estate mutual funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect these mutual funds to outperform their peers in the future. To view the Zacks Rank and past performance of all real estate funds, then click here.

Oppenheimer Real Estate A (OREAX) utilizes the majority of the fund's assets to purchase equity securities, such as common stocks of companies form the real estate sector. It may also consider parking funds in real estate operating companies. The real-estate fund returned 34.47% over the last one year period.

Scott C. Westphal is the Fund Manager and he has been managing this real estate fund since 2002.

Franklin Real Estate Securities A (FREEX) seeks both current income and capital growth. Real estate investment trusts and companies which derive at least half of their revenues from operations in the real estate sector constitute its major investments. The real-estate mutual fund has a ten year annualized return of 4.92%.

The real estate mutual fund has a minimum initial investment of $1,000 and an expense ratio of 1.18% compared to a category average of 1.46%.

John Hancock Real Estate Securities (JIREX) invests a large proportion of its assets in equity securities issued by real estate investment trusts and companies. Not more than 10% of its assets may be invested in foreign firms. The real estate mutual fund returned 34.81% over the last one year period.

As of May 2011, this real estate mutual fund held 45 issues, with 10.22% of its total assets invested in Simon Property Group, Inc.

CGM Realty (CGMRX) seeks capital growth over the long term and current income. The fund primarily invests in companies in the real estate sector. Up to 20% of its assets may be used to purchase securities issued by firms not belonging to the real estate sector. The real-estate mutual fund has a five year annualized return of 9.05%.

G. Kenneth Heebner is the Fund Manager and he has been managing this real estate mutual fund since 1994.

DWS RREEF Real Estate Securities A (RRRAX) invests the majority of its assets in real estate investment trusts and companies. It focuses on acquiring common stock, but may also purchase preferred or convertible stocks. The real-estate mutual fund returned 36.43% over the last one year period.

The real estate mutual fund has a minimum initial investment of $1,000 and an expense ratio of 1.06% compared to a category average of 1.46%.

To view the Zacks Rank and past performance of all real estate mutual funds, then click here.

About Zacks Mutual Fund Rank

By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward. Learn more about the Zacks Mutual Fund Rank at http://www.zacks.com/funds.