Who is getting out of REITS?

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abuss368
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Who is getting out of REITS?

Post by abuss368 » Thu Apr 21, 2011 8:29 am

With another forum member noting that commercial real estate is near 25% vacant in parts of the country, how many Bogleheads are getting out of REITs or don't use them as an asset class?

Also, a new rule a little while back notes that REITs can issue shares rather than cash for dividends may be alarming.

Thoughts?

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TheDan666
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Post by TheDan666 » Thu Apr 21, 2011 8:58 am

I got out out of REITs when I did my yearly re-balance about 2 months ago. Had the REIT index for about a year and a half. It did very well when I had it. No regrets. I just went for more simplification and re-balancing with REITs just looked like too much of a pain in the ass.

--The Dan

Tex
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Post by Tex » Thu Apr 21, 2011 9:01 am

Stay the course.

HAZEL
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Post by HAZEL » Thu Apr 21, 2011 9:15 am

We continue to hold Vanguard REIT index in our Roth accounts. Long term investment. Still believe in the value of diversification. We understand that some asset classes will under perform others at any given time. Therefore, no change required in our IPS.

On another note, we have some friends who own a couple of "unlisted REITs". Purchased at $10.00 per share. They recently received a letter suggesting that the REIT they own is not doing well and would they like to sell. The offer was $4.50 per share. Anybody have experience in this area, or could anyone direct us to information that would help them evaluate their choices?

tomd37
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Vanguard REIT Index Fund

Post by tomd37 » Thu Apr 21, 2011 9:18 am

I agree with Tex, stay the course. 10% of my total portfolio is in the Vanguard REIT Index fund and has been for the last ten years. I also realized the TSM fund has about 3% in REIT investments. I tend to agree with Burton Malkiel's (The Random Walk Guide to Investing) philosophy that REITs provide some income growth to cope with inflation for us retirees. He advocates up to 15% of total portfolio in REITs for those in their late 60s and beyond in our tax-advantaged accounts. He even advocates REITs for all ages from 10% on up.
Tom D.

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CrankyManager
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Post by CrankyManager » Thu Apr 21, 2011 9:28 am

5% of our total AA on any given day is allocated to real estate.

I own VNQ in my IRA. My future wife owns TIAA Real Estate.

We also have the benefit of having our money invested in two very different investment vehicles.

We'll stay the course.
"Does not Dionysius seem to have made it sufficiently clear that there can be nothing happy for the person over whom some fear always looms?" -- Cicero

Grt2bOutdoors
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Post by Grt2bOutdoors » Thu Apr 21, 2011 9:33 am

Ha! As part of adjusting my asset allocation, I added Global Reits to the mix. I'm staying the course.

Wagnerjb
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Re: Who is getting out of REITS?

Post by Wagnerjb » Thu Apr 21, 2011 9:39 am

abuss368 wrote:With another forum member noting that commercial real estate is near 25% vacant in parts of the country, how many Bogleheads are getting out of REITs or don't use them as an asset class?
Too late. REIT prices already reflect both today's situation and the expectations for tomorrow's situation.

Best wishes.
Andy

walker46
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Post by walker46 » Thu Apr 21, 2011 9:43 am

I'm staying the course but I've stopped automatically re-investing the dividends in VGSLX. I still do on the rest of my funds so I guess that is sort of a passive re-allocation.

hsv_climber
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Re: Who is getting out of REITS?

Post by hsv_climber » Thu Apr 21, 2011 10:00 am

Wagnerjb wrote:
Too late. REIT prices already reflect both today's situation and the expectations for tomorrow's situation.

Best wishes.
:thumbsup

Great post!

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DartThrower
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Post by DartThrower » Thu Apr 21, 2011 10:16 am

GRT2BOUTDOORS wrote:Ha! As part of adjusting my asset allocation, I added Global Reits to the mix. I'm staying the course.
Ditto. I keep the REIT allocation small, as diversified as possible and in the tax advantaged space. Then I stay the course and don't worry about it.
A Boglehead can stay the course longer than the market can stay irrational.

EStreet33
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Post by EStreet33 » Thu Apr 21, 2011 10:26 am

REITs are not in my AA and I have no plans to include them any time soon.

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midareff
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Post by midareff » Thu Apr 21, 2011 10:28 am

I'm stay the course guy with an 8% allocation to VNQ in a tax advantaged account. No plans to change.

carolc
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Post by carolc » Thu Apr 21, 2011 10:42 am

I'm staying at 8% (plus or minus 1%) which is my plan.

carolc

DblDoc
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Post by DblDoc » Thu Apr 21, 2011 11:22 am

Staying the course @ %5. Is there some fundamental change in REIT's as an asset class that has changed and I missed?

DD

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Scott S
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Post by Scott S » Thu Apr 21, 2011 11:34 am

I've got it in my Roth (it's like 3-4% of my portfolio), but I did take a tax hit by cashing out of it in my taxable account last year. :( It was ultimately the right thing to do, though.

- Scott
My Plan: (Age-10)% in bonds until I reach age 60, 50/50 thereafter. Equity split: 50/50 US/Int'l, Bond split: 50/50 TBM/TIPS.

Wagnerjb
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Post by Wagnerjb » Thu Apr 21, 2011 12:21 pm

I rebalance my investments periodically, and that includes REIT. In 2006, REIT values were extremely high, causing me to rebalance - by selling - when the fund NAV was $26.32 per share. Here is the conversation where I indicated my actions:

http://socialize.morningstar.com/NewSoc ... ID=2281721

In 2009, REIT balances were very depressed, causing me to rebalance by purchasing REIT at $7.35 per share. Here is the conversation:

http://www.bogleheads.org/forum/viewtop ... eit#416307

Buying at $7.35 and selling at $26.32 sure puts a smile on your face. Forget about trying to time the market - rebalancing a stable asset allocation does a wonderful job of that for you. :D :D

Best wishes.
Andy

norm
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Post by norm » Thu Apr 21, 2011 12:41 pm

I bought CGM Realty in 2003 and sold it in 2006 for a 32% gain.

I bought VIPSX in 2007 and sold it in 2008 for a 21% loss.

Have not owned a real estate fund since and have no plans to buy any.

gkaplan
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Post by gkaplan » Thu Apr 21, 2011 1:15 pm

Twelve percent of my overall portfolio. Has been for quite some time.
Gordon

Tom_T
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Re: Who is getting out of REITS?

Post by Tom_T » Thu Apr 21, 2011 1:49 pm

Wagnerjb wrote:
abuss368 wrote:With another forum member noting that commercial real estate is near 25% vacant in parts of the country, how many Bogleheads are getting out of REITs or don't use them as an asset class?
Too late. REIT prices already reflect both today's situation and the expectations for tomorrow's situation.
That doesn't mean they can't go lower (or higher, of course.) And, there is no "one" expectation for tomorrow's situation.

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G12
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Post by G12 » Thu Apr 21, 2011 2:17 pm

Wagnerjb wrote:
abuss368 wrote:
With another forum member noting that commercial real estate is near 25% vacant in parts of the country, how many Bogleheads are getting out of REITs or don't use them as an asset class?



Too late. REIT prices already reflect both today's situation and the expectations for tomorrow's situation.

That doesn't mean they can't go lower (or higher, of course.) And, there is no "one" expectation for tomorrow's situation.
True, but it still doesn't mean current market valuation is reflective of underlying value. EMH is assumed accurate until it isn't, like in the latter half of 2008 and 1Q2009, cap rates were suboptimal well before that point as well. Pretend and extend did occur by financial institutions and current vacancy rates are what they are, which is high. I sold all REITs in 2006/2007 and no longer hold them. It wasn't market timing, it was based upon valuations after a multi-year run up and then current cap rates. I am neither pro nor con REITs, just choose not to own them as a sector holding.

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MR_Rossi
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Post by MR_Rossi » Thu Apr 21, 2011 2:22 pm

REITs are 10% of my total retirement portfolio. This may be a little higher than what's usually reccomended because I have 25-30 years before retirement, but 10% is a nice round number and I believe in the diversification offered by this fund. I also have 15% of my portfolio in Small-Cap Value, which I know also contains some REITs. It sounds aggresive, but I'm comfortable with the allocations provided by M*'s Portfolio X-Ray for my retirement investments.

MR

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BruceM
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Re: Who is getting out of REITS?

Post by BruceM » Thu Apr 21, 2011 2:26 pm

abuss368 wrote:With another forum member noting that commercial real estate is near 25% vacant in parts of the country, how many Bogleheads are getting out of REITs or don't use them as an asset class?

Also, a new rule a little while back notes that REITs can issue shares rather than cash for dividends may be alarming.

Thoughts?
It really depends on why you're holding REITs.

Your previous posts suggests that you are looking to REITs for reliable household income. If so, you're only concern in holding a given REIT would have to do with their ability to sustain their distribution, regardless of what the vacancy rate is for some REIT sector in some part of the country.

If you are holding it as part of an AA in a diversified portfolio invested for TR, then selling any of your securities based on some non-specific market indicator is really a form of market timing. It is generally advisable not to do that, as you'll find over time that the market indicator (or market news) you used to sell was either wrong or overshadowed by other events. Its generally best to maintain your AA and rebalance on schedule.

BruceM

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