Q: Despite the housing sector’s woes, many real estate investment trust (REIT) mutual funds and exchange-traded funds (ETFs) are doing well. Why? And should I add REITs to my diversified portfolio?

A: REITs have real estate in their name. But don’t confuse real estate investment trusts with what’s commonly known as the housing sector, or single-family homes.

REITs are special corporate structures that own and invest in largely commercial real estate. They’re the companies that own strip malls, office buildings, medical offices and apartment buildings. There are some exceptions, but most REITs do not own stand-alone single-family homes.

And that’s precisely why REIT investments often move in the opposite direction from the single-family home market. Apartment REITs are a great example. When homes get affordable due to low mortgage rates and many individuals are buying, the single-family home sector booms. But apartment REITs suffer. Why? Every family that buys a home is a family that won’t need and apartment. When home buying dries up, apartment REITs benefit as more people look for places to rent.

There are similar dynamics with office-building REITs. As is the case now, business activity is strong, so demand for office space has been solid. That’s been helpful for office REITs, despite a slow market for housing.

REITs also benefit from buyout interest by private-equity firms, such as Blackstone. You can read about a recent take-private deal here. Such transactions make investors figure that REITs are more valuable than their current stock prices reflect.

Now that you understand the difference between REITs and single-family home sales, you can see why REITs are doing great this year. The iShares Cohen & Steers Realty Major exchange-traded fund (ICF). which owns REITs, is up 41.6% this year, not including dividends. That’s tremendous if you consider REITs returned 14%, 33.2%, 36.2% and 3.6% in 2005, 2004, 2003 and 2002 respectively, says Dow Jones Wilshire. And REITs often gain when stocks falter.

If you haven’t guessed already, the answer is yes: REITs belong in a diversified portfolio. How much is what’s up for debate. That really depends on your overall taste for risk. Try taking the risk capacity survey at IFA.com to see how much REIT exposure makes sense. Generally advisers recommend anywhere from 5% to 10% of your portfolio depending on what else you own.

Matt Krantz is a financial markets reporter at USA TODAY. He answers a different reader question every weekday in his Ask Matt column at money.usatoday.com. To submit a question, e-mail Matt at mkrantz@usatoday.com .