Reits Vs Bond
Bonds are very sensitive to interest rate fluctuations.
If interest rates rise, the market value of a bond decreases. If the investor must sell at this time, they will receive less than face value. If interest rates fall significantly, the bond is in risk of being called. The investor gets their full value but must then find another investment at a lower yield. Since many REITs are invested in commercial or residential rental properties with fixed mortgages, a rise in interest rates will not significantly impact their profitability. On the contrary, they can push potential home buyers into rentals, thus increasing demand and raising rents.
Inflation reduces the bond owner's buying power. Inflation reduces the buying power of the dollar.
Your bond investment is fixed at the value and yield at which purchased. Inflation eats away at your return. With REITs, inflation driving up the price of housing can also move more people into the rental market. With increasing demand, the REIT can raise rents and profits.
Bond values are fixed, while REIT shares can climb.
As we've stated, the bond you purchase at $5000 will return that amount to you at maturity, with interest. The REIT will also be paying a dividend throughout your period of ownership, as by law they must return 90+% of their operating profits to the share holders. REITs that are operating efficiently can increase their profits through good management or increased rents with higher demand. They can also purchase and sell properties to create profits. Doing these things well results in financial performance that creates more demand for the REIT shares, thus their prices can rise like any normal stock.