Which of the following is NOT an advantage of investing in equity REITs?

• A. Potentially increasing cash flows.
• B. Guaranteed return of principal.
• C. Long-term hedge against inflation.
• D. Long-term capital appreciation.

Answer: (B)

Equity REITs provide exposure to real estate cash flows and potential price appreciation, but there is no guarantee you’ll get your principal back. These investments own and operate properties, so rental income can grow as rents rise or occupancy improves, supporting potentially increasing cash flows. They can also act as a long-term hedge against inflation because rents and property values tend to move with inflation, helping preserve purchasing power over time. Over the long run, property values can appreciate, offering capital gains as well. However, the value of an equity REIT—and its dividends—depends on market conditions, financing costs, and property performance, so principal protection isn’t assured.