If you are feeling jittery about buying another home to pad out the real estate investment portion of your portfolio, consider a real estate investment trust, also known as a REIT.

Much of the REIT sector is running with the bulls -- double time.

The National Association of Real Estate Investment Trusts (NAREIT) reported earlier this month, that the primary U.S. REIT index, the FTSE NAREIT All REITs Index, delivered a total return of 34.35 percent for 2006, outperforming all other major U.S. equity market benchmarks for the seventh consecutive year.

And the University of Southern California's Lusk Center For Real Estate says, with some investor shifts in investment strategies, 2007 is likely to make that eight consecutive years.

"Shareholders who received attractive payouts when the REITs were acquired are reinvesting some of that capital directly into real estate," said Stan Ross, chairman of the board at the Lusk Center.

REITs are largely publicly and privately traded companies (some private REITS aren't traded) 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. Even if shares aren't increasing in values, dividends continue to pay out.

NAREIT says two-thirds of the REIT index's 12.72 percent average annual total return over the past 20 years was delivered in the form of dividends.

The FTSE NAREIT All REITs Index, is a broad-based index consisting of all tax-qualified REITs listed on the New York Stock Exchange, American Stock Exchange, and NASDAQ National Market List.

NAREIT said the 2006 performance of that primary index exceeded the S&P 500 at 15.79 percent, the Dow Jones Industrials at 16.29 percent, the Russell 2000 at 18.37 percent and the NASDAQ Composite at 9.52 percent.

Top-performing REIT industry sectors and their total returns for 2006 included the office segment, at 45.22 percent, health care, 44.55 percent, self-storage, at 40.95 percent and apartments at 39.95 percent. Investors can diversity their REITs portfolio and buy REITs by industry sectors.

This year the office segment cashed in on steady economic growth and increased employment. Health care, much like the second home market, enjoyed the impact of the baby boomer generation. Self-storage and apartment segments received spill over from the high-flying, owner-occupied housing market.

But just as those sectors enjoyed economic favoritism other REIT sectors didn't fare as well and the difference points to the reason investment fundamentals always apply.

Returns on mortgage REITs were up 17.45 percent in 2006, but in 2005 were flattened by a 23.19 percent decline in returns. Mortgage REITs lend money directly to real estate owners and their operators, or indirectly through acquisition of loans or mortgage-backed securities and home buyers fleeing the market is, in part, what shifted greater returns to apartment REITs.

Likewise Hybrid REITs' 37.14 percent jump in returns in 2006, followed a 10.83 percent decline in 2005. Hybrid REITs are companies that both own properties and make loans.

Other, more specialized REIT sectors have also had some tough times in recent years.

However, seeking professional investment advice and applying the fundamentals of diversification, paced investing and long-term investing helps take the sting out bear biting years.

Lusk says 2007 could usher in a shift from public to private REITs as investors seek to get closer to the source of their returns.

"Although prices have increased on investment-grade properties, investors can realize competitive returns on second-tier properties, depending, as always, on the location," Ross said.

Large metro areas will continue to draw investors as capital flows into traditional office, retail, industrial and hotel assets, but investments in urban infill, adaptive reuse and mixed use development near or in city cores and transit centers should heat up too.

"For the past five years, REITs have outperformed the stock market.

By buying a company, investors in a single stroke are able to pick up assets they otherwise might not have been able to acquire and assemble in a profitable portfolio," Ross said.