Question

Which of the following is NOT an advantage for a customer adding REITsto her portfolio? Being...

Which of the following is NOT an advantage for a customer adding REITsto her portfolio?

Being able to use a REIT as a potential hedge against a negative price movement in other equity securities

Preferential dividend treatment

Having a professionally managed portfolio of real estate assets

Liquidity
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Answer #1

Answer:-  Preferential dividend treatment

(Explanation:- Only Preferential dividend treatment can be identified as not being an advantage as the dividends paid by REITs to their shareholders are not recognized as qualified and are taxable to the investor at their full ordinary income tax rate.

Others are actually an advantage as the shares are traded on exchanges or OTC, so they are considered liquid and having professionally managed assets should be a plus. Along with this, the real estate has provided some hedge against the movements of other equity securities, which is also an advantage.)

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