Which statement is TRUE regarding Real Estate Investment Trusts (REITs)?

The statement that REITs may be traded on an exchange is true because publicly traded REITs operate similarly to stocks and shares of other publicly traded companies. These types of REITs are listed on stock exchanges, allowing investors to buy and sell shares at market prices during trading hours. This trading feature provides liquidity, making it easier for investors to enter and exit their investments in real estate without needing to directly buy or sell properties.

In contrast, while some REITs are privately held and do not trade on major exchanges, it is the publicly traded REITs that offer this exchange-listing advantage. Additionally, REITs do not guarantee a fixed return on investment; their performance is tied to the returns generated by the real estate they manage, and thus they can vary widely based on market conditions and property performance. Furthermore, while REITs enjoy certain tax advantages, they are typically required to distribute a significant portion of their income as dividends and are not entirely tax-exempt entities.