Real-estate investment trusts, often thought of primarily as a way to diversify a portfolio, are playing a starring role this year.

The FTSE Nareit All REITs index—the broadest U.S. REIT index, with a market capitalization of $1.4 trillion—had total a total return, including dividends, of 26.05% this year as of July 31, versus 17.99% for the S&P 500 index.

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