What is a diversified REIT?

A diversified REIT is defined by its strategy of investing in a broad range of real estate sectors, which can include residential, commercial, industrial, and more. This diversification allows these REITs to spread their risk across different types of properties and income sources. By holding a variety of assets, diversified REITs aim to mitigate the impact of downturns in any single sector, making them potentially more resilient to market fluctuations.

Investors often favor diversified REITs because they can offer balanced exposure to the real estate market without being heavily dependent on one type of property. This can provide a more stable income and reduce volatility in returns, as the performance of different sectors can counterbalance each other.

The other choices illustrate specific investment strategies that limit exposure to a single sector, which does not align with the definition of a diversified REIT. By focusing only on one sector, such REITs can be more susceptible to sector-specific risks and less adaptable to changing market conditions.