Real estate experts are questioning a self-serving national study advising home owners not to stake too much on their home as an investment. Your home, the study says, should not be considered as a suitable alternative to an investment in real estate stocks.

However, critics say, the National Association of Real Estate Investment Trusts' (NAREIT) report "Homeownership and Investment in Real Estate Stocks" understates the true value of a home and it overlooks some of REITs shortcomings.

NAREIT's study says the Office of Federal Housing Enterprise Oversight's index of single-family house prices nationwide gained an average 5.7 percent each year from 1976 to 2001. Equity REITs produced a 6.1 percent average annual return and, with reinvested dividends, yielded an average return of 15.2 percent for the 25-year period.

REITs are publicly traded companies that invest in and manage income-producing real estate property. Investors typically purchase REITs in the form of a managed investment -- a mutual fund comprised of REITs. REITs provide a return in the form of increased share values, but investors also like them because REITs provide an income stream in the form of dividends.

"You could have a portfolio of REITS that aren't going anywhere, but you are still getting this stream of income," said Bill McCann, a wealth management advisor and vice president with Merrill Lynch in Menlo Park, CA.

The study concedes the home offers the tangible aspect of shelter that makes it difficult to measure against conventional investments' returns and it discusses the benefits of investment leveraging (as little as nothing down) buyers enjoy when they purchase a home.

"Owner-occupied housing differs from other investments in some significant ways," according to NAREIT Senior Vice President for Research and Investment Affairs Michael R. Grupe.

"Houses tend to be more highly leveraged than other investments, with most bought on margin through a mortgage loan. Houses are undiversified investments, in contrast to mutual funds or other investment vehicles that pool a large number of equities and fixed-income securities. While the tax treatment of owner-occupied housing is unique, the transactions costs of buying and selling houses generally exceed those of publicly traded securities by a wide margin," said Grupe.

"In the final analysis, your house may be a home -- perhaps even a good investment -- but it's no substitute for real estate stock investment," Grupe said.

Perhaps. Perhaps not.

Investment experts agree REITs can be a good way to diversify and balance an investment portfolio because diversification requires a variety of investments that don't move in tandem.

"This report highlights that REITs and home prices appear to have a lower correlation. REITs are a good investment as part of a diversified portfolio. In recent years, they have paid much higher dividends than other stocks which has provided them with insulation from the severe bear market. Over the most recent three-year period, Vanguard's REIT index fund has produced an annual average rate of return of 12.4 percent. REITs are a useful way for renters to get exposure to the real estate market and you can't argue with the simplicity compared with buying and managing rental property," said Eric Tyson, a New England financial counselor and co-author of "Dummies" guides to investing and personal finance.

The problem with the study, critics say, is that it doesn't tell the full REIT story.

REITs have begun to suffer some economic fallout from the weakened commercial real estate market, while residential real estate has remained relatively strong through the recession. In the past 20 years, residential real estate has suffered some value losses, but never more than immediately preceding gains. The same can't be said for REITs.

"Remember statistics can say anything you want them to say," says Richard Calhoun, a real estate statistician, investor and broker with Creekside Realty in San Jose.

"I wouldn't be bragging about a 6.1 percent appreciation and the 15.2 percent is very misleading. On a home with 20 percent down, when you include the leverage factor, the yield would be 28.5 percent," says Calhoun.

The report also does not fully consider regional market booms. In Silicon Valley, without considering the benefits of leveraging, home prices more than quadrupled during a shorter 1984-to-2002 period -- the only stretch of verifiable data, according to Calhoun.

Corporate book cooking has forced scrutiny of all corporate operations and many REITs corporate structures are "a tangled mess," according to "Takeover Offer Shows Poor REIT Governance" a RealEstateJournal.com (Wall Street Journal) report this month that chronicles a hostile takeover attempt of one REIT by another.

Author Dean Starkman, a Wall Street Journal staff reporter, reports that the takeover attempt put the spotlight on REITs corporate structures as both sides point to "governance gaffes" .

"The actions of both REITs are enough to make a governance guru blanch. The noisy fight has been an eye-opener for investors, especially newer ones attracted to the sector by the inclusion of the biggest REITs ... in the Standard & Poor's 500-stock index, starting during the fall of 2001. But even the REIT-savvy have been surprised by the extent of founders' powers at a time when most companies are seeking to check the power of their top executives," writes Starkman in the Jan. 7, 2003 report.

Days later, in "Is a Dividend Tax Cut Bad News for REITs?" Stark further examines REITs in terms of how the Bush Administration's planned tax cuts -- including a tax break for dividend income -- could affect REITs' attractiveness. While REITs will likely remain attractive as a diversifying investment, the tax break could cause REITs to lose some of that dividend-based investment return advantage over stocks. Start reported REIT shares dropped on the news of Bush's tax break proposal.

"Any plan that makes regular corporate dividends more attractive would tend to siphon investment dollars away from REITs," Stark wrote in the Jan. 15, 2003 article.

REITs, like bonds and commodities, likely will remain a good way to diversify your portfolio, but they obviously can't replace a home as a tangible asset. It's also questionable to compare returns on investments that can be as different as apples and oranges and, despite the REIT study's findings, there are often times when more home is a better investment than adding REITs to your portfolio.

"It's not a fair comparison. A REIT is a mutual fund that invests in certain parcels and is managed by others which, for the smaller investor, makes them a little like being in bed with a lion. When the lion decides to roll over, you will too," says Dane Hahn a residential and commercial broker with Exit 11 Real Estate in Stratham, NH.

"It's ridiculous to think that your own home (owner-occupied) is an investment, because regardless of the economy you need a place to live. When all signs point to unloading that "investment," you can't have the family sniveling, and wondering where are they going to live. It's fairly obvious by the tenor of the study that it was paid for by the REIT group," Hahn said.