REIT INDEX

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Rockaway
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REIT INDEX

Post by Rockaway »

Given the commercial real estate market and the trend away from shopping centers to online sales are REIT index funds worth considering?
Johm221122
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Re: REIT INDEX

Post by Johm221122 »

Shopping centers are not the only commercial real estate
There is also things like office space and medical offices
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Metsfan91
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Re: REIT INDEX

Post by Metsfan91 »

Rockaway wrote: Fri Feb 09, 2024 11:14 pm Given the commercial real estate market and the trend away from shopping centers to online sales are REIT index funds worth considering?
Nope. Total stock market is better.

I had REIT and held on to it. I stopped adding to it few years ago. If I were to start over, I won't add REIT.
"Know what you own, and know why you own it." — Peter Lynch
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hammockhiker
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Re: REIT INDEX

Post by hammockhiker »

Rockaway wrote: Fri Feb 09, 2024 11:14 pm Given the commercial real estate market and the trend away from shopping centers to online sales are REIT index funds worth considering?
The decision on whether to overweight REITs shouldn't be made, in my opinion, based on current market conditions but more on thoughts of the long term. My thinking on REITs has been shaped by people like Burton Malkiel and George Sisti's On Course Financial Planning blog and more specifically his "lazy golfer" portfolio. For that reason, I do hold VGSLX (Vanguard REIT index) at 5 percent of my holdings.

That's not advice for anyone else, more an explanation for my actions.
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mrmass
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Re: REIT INDEX

Post by mrmass »

Ever hear of Industrial REITs? All that inventory has to be stored somewhere…
aas
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Re: REIT INDEX

Post by aas »

I had a REIT index fund and it is not worth it, total market or SP500 index fund is a better option. My REIT index returns were dismal over the time I owned it and it took my brokerage firm until late February/early March to get the 1099-Div.
anil686
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Re: REIT INDEX

Post by anil686 »

IMO the right reason to hold a REIT is if you feel the economic impact of real estate is not properly reflected in TSM (publicly traded) since most commercial real estate is privately held. I’m not saying that is a good reason to hold it above market weight but it makes logical sense that can allow you to hold it a fixed percentage for a long time due to the reasoning behind it. I do not overweight REITs but when I read Rick Ferri’s book many years ago (I think about 15 years ago) on asset allocation, I started holding REITs as 5% of my overall portfolio, about 6 years ago, I transitioned to just a 3 fund portfolio as I thought the complexity was not worth it to me. Hope it helps…..
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retiredjg
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Re: REIT INDEX

Post by retiredjg »

Your choice. Personal preference. Sometimes you will be happy. Sometimes you won't. Nobody knows if holding extra REIT will be profitable or not.
Capster1
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Re: REIT INDEX

Post by Capster1 »

I actually sold 40% of my REIT index last week and used it to buy Total Stock Market.
There are too many people assuming rates are going to drop soon and REITs will do great as a result. I don’t think this will play out nearly as smooth as they think. Of course, that’s not entirely why I sold. I need more simplicity.
I also have enough REITS via VTI and my other index funds.
Doctor Rhythm
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Re: REIT INDEX

Post by Doctor Rhythm »

A year ago, your posted goal was to reduce the number of funds you owned. Unless your strategy and beliefs have changed dramatically in the past 12 months, this should still be your goal. Your REIT fund was < 1% of your portfolio, so I’d say ditch it.
MrCheapo
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Re: REIT INDEX

Post by MrCheapo »

Metsfan91 wrote: Sat Feb 10, 2024 12:02 am
Rockaway wrote: Fri Feb 09, 2024 11:14 pm Given the commercial real estate market and the trend away from shopping centers to online sales are REIT index funds worth considering?
Nope. Total stock market is better.

I had REIT and held on to it. I stopped adding to it few years ago. If I were to start over, I won't add REIT.
Were you by chance born in 1991? Well you should know there was a period known as the lost decade (2000 to 2010) where SPY's CAGR was just 3% p.a. VTI was a bit better but not by much.
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nisiprius
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Re: REIT INDEX

Post by nisiprius »

1) Here's what the Bogleheads' investment philosophy does not say: "Constantly evaluate business sectors and keep changing your portfolio by constantly rotating into the sector with the best future prospects." Here's what the Bogleheads' investment philosophy]does say:
Rather than trying to pick the specific stocks or sectors of the market that may outperform in the future, buy funds that are widely diversified, or even approximate the whole market.
2) I don't remember anybody ever saying that the reason to hold a REIT index fund had anything to do with the business success of shopping centers.

3) Exercise: here is the composition of the Vanguard REIT Index fund. What category do shopping centers fall in? What percentage of the REIT index fund is that?

Data Center REITS 8.30%
Diversified Real Estate Activities 0.20%
Diversified REITS 2.10%
Health Care REITS 7.80%
Hotel & Resort REITS 2.80%
Industrial REITS 12.80%
Multi-Family Residential REITS 8.10%
Office REITS 4.80%
Other Specialized REITS 6.00%
Real Estate Development 0.30%
Real Estate Operating Companies 0.30%
Real Estate Services 7.00%
Retail REITS 12.70%
Self-Storage REITS 7.00%
Single-Family Residential REITS 4.50%
Telecom Tower REITS 12.90%
Timber REITS 2.50
Last edited by nisiprius on Mon Feb 12, 2024 6:44 am, edited 1 time in total.
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grabiner
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Re: REIT INDEX

Post by grabiner »

Rockaway wrote: Fri Feb 09, 2024 11:14 pm Given the commercial real estate market and the trend away from shopping centers to online sales are REIT index funds worth considering?
The traders who determine stock prices know this already, so they trade REITs at prices consistent with the future expectation; there is no point in timing the REIT market.

The logic for holding REITs is that in an efficient market, you would want to hold all assets in proportion to their weight in the investment universe. Real estate is underweighted in the stock market since much of it is privately held, so you can hold the investment universe weight of real estate while overweighting it relative to the stock market.
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Elysium
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Re: REIT INDEX

Post by Elysium »

Rockaway wrote: Fri Feb 09, 2024 11:14 pm Given the commercial real estate market and the trend away from shopping centers to online sales are REIT index funds worth considering?
What's the yield on REIT index now? what is it in relation to S&P 500 yield?

there was a time when REITs were giving in excess of 6% yields, almost double S&P 500 back then, and it did have a positive effect on returns in the years that followed. Since then they have gone down substantially, if the payout isn't great then why would anyone invest in a separate REIT index? makes no sense to me.

I looked it up after I wrote this, it's pretty dismal. I won't touch it with a 10 foot pole. Jack Bogle wrote about sector investing in his books to the effect of one may invest 5% in any sector such as Healthcare, Energy, or REITs, however he added REIT's are a sector subject to the vagaries of the stock market, so he was less enthusiastic about them as a sector than others if one must invest in a sector. I think there is no case for overweighting them, either given the current yields or the long standing observations such as above.
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Metsfan91
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Re: REIT INDEX

Post by Metsfan91 »

MrCheapo wrote: Sun Feb 11, 2024 10:59 am
Metsfan91 wrote: Sat Feb 10, 2024 12:02 am
Rockaway wrote: Fri Feb 09, 2024 11:14 pm Given the commercial real estate market and the trend away from shopping centers to online sales are REIT index funds worth considering?
Nope. Total stock market is better.

I had REIT and held on to it. I stopped adding to it few years ago. If I were to start over, I won't add REIT.
Were you by chance born in 1991? Well you should know there was a period known as the lost decade (2000 to 2010) where SPY's CAGR was just 3% p.a. VTI was a bit better but not by much.
No, not born in 91. I am a Mets fan who falls at the 91st percentiles :-)

REIT has lost its mojo. Future is truly unknown. Better to keep things simple. Slicing and dicing is unnecessary.
"Know what you own, and know why you own it." — Peter Lynch
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