I'm trying to think about the right way to answer that and not be too longwinded about it.Kathys wrote: ↑Sat May 19, 2018 7:27 am
I follow David Swensen who recommends:
15% real estate
so i'm always going to have a permanent allocation to real estate and for me the question mostly boils down to: TIAA Real estate or REITs or both.
Both TIAA Real estate and REITS are transparent and liquid. i.e. you can see what they own and you can get your money out quickly if you want/need to.
as of 3/31/18
TIAA Real estate's recent 1/3/5/10 year returns are: 4.2% 5.2%, 7.7%, 2.5%
Vanguard Real estate index's (VGSIX) 1/3/5/10 year returns are: -4.0% 3.0% 4.4% 5.9%
so arguably the returns are at similar levels but they are different from each other, one may zig while the other zags. Notably reits have better long term returns but TIAA Re has better near term returns.
With REITs you have leverage which increases risk. VGSIX lost 37% in 2008 and then lost 32% in Q1 2009. That was a cumulative 57% loss for those 5 quarters. Quite a ride.
TIAA Real estate does have manager risk. In particular they are doing like basically zero investing in the midwest right now
if you look a this fact sheet you'll see they have 2.5% in the midwest.
Their managers seems to have a lot of conviction that midwest real estate sucks. Are they right? maybe? or maybe they are just following the crowd..
in short i think both TIAA Re and VGSIX are worth investing in. I wouldn't let either get to more than 10% each of my risk portfolio, i.e. 20% in total.
sorry to be longwinded after all...