hsv_climber wrote:InvestorNewb wrote:Elbowman wrote:Do you have an IPS?
I manage the portfolio myself, so no IPS here.
What does it mean "manage the portfolio myself"? Tactical Asset Allocation?
InvestorNewb wrote: Is 20% too high to allocate to REITs? . . .
. . . .. But VNQ has been "on fire", as I've already gained around 8.5% in ~2.5 months.
InvestorNewb wrote:I manage the portfolio myself, so no IPS here.
Occupier wrote:Yes 20% is too high. First why do you hold REITS which are just less then 2% of the market by market cap? The answer per Fama/French is that they don't correlate with other asset classes. That means they tend to go up when other classes don't do well, and go down when other classes do well. Following up on the last thought if you really overemphasize REITS they become like the tail wagging the dog. I.E. you don't correlate with other portfolios, but go up when others go down, and down when others go up. Now look at the valuations for REITS compared to where they were in the past. Right now REITS sell for about 2.5 times the book value of the real estate they own and they sell for about 60 times earnings. In 1999 REITS sold for just less then their book value and about 15 times earnings. So right now they are at a historic high. I see posts like yours any time an asset class has had a good run. Back in 1999 people were posting they you should not have REITS but should be loading up on tech stocks. The rest is history. Now if you want something to put in that extra tax free space look at Small Value. Dave
InvestorNewb wrote:^^ Thanks for these very helpful insights.
In the last 10 years (probably longer) both REITs and the Total Stock Mkt Index have been pretty closely correlated:
I guess one of my other concerns was whether REITs have ever been "flat" for years at a time, or have they always been somewhat correlated with the S&P500/Total Stock Mkt Index?
I have more contribution space in my tax-deferred account, so I'm thinking about buying more REITs.
If I use the full amount to buy more REITs, it will account for about 20% of my overall portfolio. It's already very high even before the new contribution.
Is 20% too high to allocate to REITs? My understanding is that REITs isn't really a sector, but an asset class of its own. Is this correct?
At the rate things are going, I feel like Vanguard's REIT ETF, VNQ, will soon be priced higher than the Total Stock Market Index, VTI. VTI is currently at $82.16, while VNQ is at $75.14. But VNQ has been "on fire", as I've already gained around 8.5% in ~2.5 months.
abuss368 wrote:1) IPS - I use a spreadsheet that details our asset allocation. We set it and stay the course in all markets. As for a formal document, signed, etc. we don't have a need for it.
Another reason I want to buy more REITs in my tax deferred account is to take advantage of the high dividends yields without having to pay any tax on them for years to come.
abuss368 wrote:Check out the latest issue or REIT Magazine with the REIT King himself Sam Zell on the cover. You can access the issue here for your reading pleasure: http://www.reit.com
In the interview, Sam Zell thinks over the next 10 years or so International REITs are going to be big.
When experts like Sam Zell talk, especially about REITs, I listen.
InvestorNewb wrote:Any ideas for why REITs have been tumbling this week?
abuss368 wrote:If REITs are out of flavor then back up the truck and rebalance into them while they are on sale.
InvestorNewb wrote:They might be... but I'm more of a subscriber to the "Nobody knows nothing" philosophy, as Jack Bogle has said before.
JoMoney wrote:I have to say, REITs scare me right now. Maybe this is a good indicator for the contrarians ?
There seems to be an awful lot of REIT IPO's (including new-share offerings from existing companies), and non-traded REITs moving into the publicly traded markets, and companies that are not traditional real estate that are incorporating as REIT's (sometimes without getting an IRS ruling that it's acceptable for them to do so). The basic fundamentals seem very high. I very much prefer to be buying from companies that think there stock is so cheap they're doing buy backs than to be buying from companies that are racing to sell off new securities. REITs seem to be the place for businesses to raise capital very cheaply (i.e. investors will pay a high price/earnings). I'm no investment professional, but this doesn't bode well with me. If the music stops it may not be pretty. If it's part of your plan to over-weight this sector you might want to carefully consider why it is you prefer this sector/class of stock and make sure that the reasoning and conditions that lead you to that are still sound.
http://www.bloomberg.com/news/2013-10-2 ... -2004.html
"adding fuel to what is already the biggest year for U.S. real estate initial public offerings in almost a decade."
http://www.investmentnews.com/article/2 ... /130509951
"Investment advisers and their clients will reap a bonanza over the next two years or so as a number of large nontraded real estate investment trusts go public or are acquired."
http://finance.fortune.cnn.com/2013/04/ ... dividends/
"In the past six months, nearly half of all companies that sold shares through an IPO, or 26 in total, have paid a dividend. ... Dividends are not normally associated with the IPO market ..."
http://www.forbes.com/sites/tomkonrad/2 ... structure/
"By going public and converting to a REIT structure, HASI is tapping a pool of relatively low-cost capital from small investors."
"recent announcement that it is taking steps to reorganize as a real estate investment trust—without the IRS's approval"
http://www.bloomberg.com/news/2013-06-0 ... plans.html
zaboomafoozarg wrote:InvestorNewb wrote:They might be... but I'm more of a subscriber to the "Nobody knows nothing" philosophy, as Jack Bogle has said before.
If nobody knows nothing, then there's not much point to asking them why REITs have been tumbling this week...
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