With the stock market making a comeback and gold climbing, real estate seems like a weak option. But savvy investors who recognize the importance of portfolio diversification are seeking opportunities even in this still gloomy environment.

According to Standard & Poor's Rating Service investors poured $10 billion in new equity for U.S. real estate investment trusts (REITs) since the stock market hit a low in March 2009.  No doubt many real estate companies will continue to experience severe problems during the remainder of 2009 and 2010. However those that are well capitalized and well managed may find opportunities to acquire high quality assets at distressed prices, according to S&P Equity Research.

So why does real estate deserve investor attention? According Vaughan Scully of Standard & Poor's, "real estate is a distinct asset class compared to equity or debt, and therefore offers meaningful portfolio diversification." In addition, real assets tend to perform well during periods of stronger inflation. Many economists think inflation will result from the massive stimulus packages the United States and other governments are funding.  Finally, some real estate companies often pay attractive dividends compared with other companies. Thus investors can expect steady returns during periods of market volatility.

Exchange Traded Funds represent a good way to gain exposure to real estate. "More than a dozen exchange traded funds are now listed that offer exposure to the real estate market, both in the United States and internationally, as well as different sectors of the real estate market, and more exotic exposures such as leveraged or inverse funds," comments Scully in Investment Advisor.  The top ETFs, he notes, are Vanguard's REIT Index ETF (VNQ) and iShares  Dow Jones U.S. Real Estate Index Fund (IYR).