Final answer:
REITs offer high liquidity, similar to stocks because they are traded on stock exchanges, but they are not redeemable. REITs play a role in allowing investors to gain exposure to real estate investments without owning physical properties.
Step-by-step explanation:
Real Estate Investment Trusts (REITs) are companies that finance or own income-producing real estate across a range of property sectors. The level of liquidity associated with REITs is generally high because they are traded on major stock exchanges like other publicly held companies, which means they can often be bought and sold relatively easily. Unlike the properties themselves, which can take time to sell, REITs allow investors to liquidate their holdings much more quickly, establishing a liquidity level similar to that of stocks. However, unlike stocks, they are not redeemable; meaning you cannot sell them back to the issuing company at your discretion. Instead, you must sell them on the open market to another investor. REITs typically serve as a way for investors to pool their money to purchase real estate, which can provide a source of income and potential for capital appreciation without requiring direct management of the properties. They offer an alternative for investors looking to add real estate to their portfolios without needing to invest in physical properties directly.