Does VTI already include REIT

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vchiu25
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Does VTI already include REIT

Post by vchiu25 »

Just curious, does VTI already include REIT? If so, what percentage?
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Methedras
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Re: Does VTI already include REIT

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G-Money
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Re: Does VTI already include REIT

Post by G-Money »

Yes, it does. If you click "Compare" on the Vanguard page for any fund, then scroll down towards the bottom, you'll see "Equity sector diversification." It lists "Real Estate" as 3.59%. The REIT fund (VNQ) has 98.67%. Small-cap value (VBR) has 17.41%, Total International (VXUS) has 4.02%, and FTSE ex-US Small Cap (VSS) has 9.23%.
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Doc
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Re: Does VTI already include REIT

Post by Doc »

vchiu25 wrote:Just curious, does VTI already include REIT? If so, what percentage?
The argument for adding more REIT is that most real estate investments are not traded on the stock exchanges therefore the amount in a total stock market funds is very much underweighted in RE.

There is also something to be gained in holding it separately because of low correlation with the rest stock market.
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Taylor Larimore
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Stock market real estate?

Post by Taylor Larimore »

vchiu25:

In addition to the 3.59% in real estate stocks owned by Total Stock Market, it should be noted that most corporations have real-estate holdings not included in the 3.59% figure.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
Valdeselad
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Re: Does VTI already include REIT

Post by Valdeselad »

G-Money wrote:Yes, it does. If you click "Compare" on the Vanguard page for any fund, then scroll down towards the bottom, you'll see "Equity sector diversification." It lists "Real Estate" as 3.59%. The REIT fund (VNQ) has 98.67%. Small-cap value (VBR) has 17.41%, Total International (VXUS) has 4.02%, and FTSE ex-US Small Cap (VSS) has 9.23%.
Thanks G-Money, I was unaware of this website feature.

These %'s appear to be pretty different than what I remember seeing in the wiki, although I don't have the link in front of me.

EDIT: Link added below

http://www.bogleheads.org/wiki/Percenta ... ndex_Funds
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G-Money
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Re: Does VTI already include REIT

Post by G-Money »

Valdeselad wrote:
G-Money wrote:Yes, it does. If you click "Compare" on the Vanguard page for any fund, then scroll down towards the bottom, you'll see "Equity sector diversification." It lists "Real Estate" as 3.59%. The REIT fund (VNQ) has 98.67%. Small-cap value (VBR) has 17.41%, Total International (VXUS) has 4.02%, and FTSE ex-US Small Cap (VSS) has 9.23%.
Thanks G-Money, I was unaware of this website feature.

These %'s appear to be pretty different than what I remember seeing in the wiki, although I don't have the link in front of me.

EDIT: Link added below

http://www.bogleheads.org/wiki/Percenta ... ndex_Funds
A lot can change in 4 years. :) For instance, Vanguard has changed its benchmarks for several of its funds. And the percentages vary over time anyway.
Don't assume I know what I'm talking about.
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iceport
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Re: Does VTI already include REIT

Post by iceport »

G-Money wrote:
Valdeselad wrote:
G-Money wrote:Yes, it does. If you click "Compare" on the Vanguard page for any fund, then scroll down towards the bottom, you'll see "Equity sector diversification." It lists "Real Estate" as 3.59%. The REIT fund (VNQ) has 98.67%. Small-cap value (VBR) has 17.41%, Total International (VXUS) has 4.02%, and FTSE ex-US Small Cap (VSS) has 9.23%.
Thanks G-Money, I was unaware of this website feature.

These %'s appear to be pretty different than what I remember seeing in the wiki, although I don't have the link in front of me.

EDIT: Link added below

http://www.bogleheads.org/wiki/Percenta ... ndex_Funds
A lot can change in 4 years. :) For instance, Vanguard has changed its benchmarks for several of its funds. And the percentages vary over time anyway.
A lot certainly has changed. Another *huge* change, possibly related to the changing percentages of REITs held in the various index funds, is that the REIT market as a whole has shifted from predominantly small- to mid-cap value companies in 2009 to predominantly large-cap blend and *growth*.

That's a change I never saw coming...

--Pete
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stlutz
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Re: Does VTI already include REIT

Post by stlutz »

There is also something to be gained in holding it separately because of low correlation with the rest stock market.
Of course, the same holds true for any other small slice of the market you might want to choose, say Materials, Utilities, or Telecom companies. REITs are really only distinctive because of their tax structure, which for the end investor makes no difference is a tax-advantaged account and is a disadvantage in a taxable account. I guess I've never understood the endless fascination with REITs on this board.
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Taylor Larimore
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"Slicing" and low-correlation.

Post by Taylor Larimore »

stlutz wrote:
There is also something to be gained in holding it separately because of low correlation with the rest stock market.
Of course, the same holds true for any other small slice of the market you might want to choose
Total Stock Market Funds hold every small slice of the market and investors benefit from the same "low correlation" whether held separately or not. The benefit, if any, comes from over-weighting category "slices."

Best wishes.
Taylor
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G-Money
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Re: Does VTI already include REIT

Post by G-Money »

petrico wrote:
G-Money wrote:
Valdeselad wrote:
G-Money wrote:Yes, it does. If you click "Compare" on the Vanguard page for any fund, then scroll down towards the bottom, you'll see "Equity sector diversification." It lists "Real Estate" as 3.59%. The REIT fund (VNQ) has 98.67%. Small-cap value (VBR) has 17.41%, Total International (VXUS) has 4.02%, and FTSE ex-US Small Cap (VSS) has 9.23%.
Thanks G-Money, I was unaware of this website feature.

These %'s appear to be pretty different than what I remember seeing in the wiki, although I don't have the link in front of me.

EDIT: Link added below

http://www.bogleheads.org/wiki/Percenta ... ndex_Funds
A lot can change in 4 years. :) For instance, Vanguard has changed its benchmarks for several of its funds. And the percentages vary over time anyway.
A lot certainly has changed. Another *huge* change, possibly related to the changing percentages of REITs held in the various index funds, is that the REIT market as a whole has shifted from predominantly small- to mid-cap value companies in 2009 to predominantly large-cap blend and *growth*.

That's a change I never saw coming...

--Pete
Just a guess, but my impression is this has less to do with index fund construction and more to do with REITs getting bid up in price as lots of investors search for higher yields.

I have a minuscule allocation to REITs, and have been wondering for a while whether it's even worth the bother. Now that they are apparently richly valued, this might be as good a time as any to dump them. But I only allow myself to make trades after getting my quarterly statements, so I guess I won't be doing this before October.
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NamedAfterThoreau
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Re: Does VTI already include REIT

Post by NamedAfterThoreau »

As a followup, since Total Stock Market is about 3.5% REITs, how is it that Total Stock Market consistently have 100% qualified dividends? With REITs having much higher dividend yields than other stocks, I would only expect a qdi of maybe 95% (that's not even counting bdc's/etc.) Are there some accounting quirks around this (maybe some "deminimus" rules)?

Not that I'm complaining, mind you :happy
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Rick Ferri
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Re: Does VTI already include REIT

Post by Rick Ferri »

There are different classifications of REITS; mortgage, equity and hybrid (very few). The percentage of equity REITs within the total stock market is approximitly 3.0%. Their market value was $544 billion as of the end of 2012 according to NAREIT.

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InvestorNewb
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Re: Does VTI already include REIT

Post by InvestorNewb »

Historically US REITs have outperformed the Total Stock Market Index. This is one of the reasons I hold them.

Another reason I hold them is to take advantage of the available space in my tax-deferred account. REITs are one of the most inefficient investments to hold from a tax perspective; it's nice reaping the benefits of my tax-deferred account for an investment that would otherwise lose so much to taxes.
Last edited by InvestorNewb on Mon Aug 19, 2013 11:06 am, edited 1 time in total.
My Portfolio: VTI [US], VXUS [Int'l], VNQ [REIT], VCN [Canada] (largest to smallest)
rkhusky
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Re: Stock market real estate?

Post by rkhusky »

Taylor Larimore wrote:vchiu25:

In addition to the 3.59% in real estate stocks owned by Total Stock Market, it should be noted that most corporations have real-estate holdings not included in the 3.59% figure.

Best wishes.
Taylor
If one added the corporate real estate holdings to the real estate stocks, what would the percentage be?
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momar
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Re: Does VTI already include REIT

Post by momar »

Doc wrote:
vchiu25 wrote:Just curious, does VTI already include REIT? If so, what percentage?
The argument for adding more REIT is that most real estate investments are not traded on the stock exchanges therefore the amount in a total stock market funds is very much underweighted in RE.

There is also something to be gained in holding it separately because of low correlation with the rest stock market.
Lots of other businesses are also privately held and not listed.
"Index funds have a place in your portfolio, but you'll never beat the index with them." - Words of wisdom from a Fidelity rep
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Doc
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Re: Does VTI already include REIT

Post by Doc »

momar wrote:
Doc wrote:
vchiu25 wrote:Just curious, does VTI already include REIT? If so, what percentage?
The argument for adding more REIT is that most real estate investments are not traded on the stock exchanges therefore the amount in a total stock market funds is very much underweighted in RE.

There is also something to be gained in holding it separately because of low correlation with the rest stock market.
Lots of other businesses are also privately held and not listed.
I think the amount of RE held in partnerships and trusts etc. are a very significant factor. I recall a number of 20 to 30% of TSM but I don't know where I got that from and a quick Google didn't help. In any case I think it is a much larger sector of the economy than the "lots of other" privately held businesses. In any case those privately held businesses probably have similar risk/reward profiles that listed businesses do. This is not true to real estate as others have implied.

We hold some 7% REITs in addition to what is included in TSM but that number is down from the past as I reduce riskier components of our portfolio with age.

In any case I am not a REIT advocate. I was just pointing out what some of the arguments for holding additional REITS above those in TSM might be.
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.
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Alskar
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Re: Does VTI already include REIT

Post by Alskar »

G-Money wrote:Yes, it does. If you click "Compare" on the Vanguard page for any fund, then scroll down towards the bottom, you'll see "Equity sector diversification." It lists "Real Estate" as 3.59%. The REIT fund (VNQ) has 98.67%. Small-cap value (VBR) has 17.41%, Total International (VXUS) has 4.02%, and FTSE ex-US Small Cap (VSS) has 9.23%.
This is very helpful! I never noticed that the "Equity Sector Diversification" shown on the main page for Vanguard funds was different than the "Equity Sector Diversification" shown on the comparison.

The comparison page has a note that says "Sector categories are based on the Industry Classification Benchmark system". Perhaps this explains the difference?

In any case, I had no idea that VTI had 3.59% real estate in it and I've owned VTI since December of 2007. Thanks for the schooling G-Money!
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