Reits and dividend appreciation

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rafkg29
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Reits and dividend appreciation

Post by rafkg29 » Sun May 26, 2019 8:39 pm

Thoughts on VNQ (Vanguard real estate fund),
VIG (Vanguard Dividend appreciation fund)
VTI (Vanguard Total stock market fund),
BND (Vanguard total Bond market fund) in the same portfolio for a Roth IRA? And what allocation would be best?

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JoMoney
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Re: Reits and dividend appreciation

Post by JoMoney » Sun May 26, 2019 9:05 pm

rafkg29 wrote:
Sun May 26, 2019 8:39 pm
Thoughts on VNQ (Vanguard real estate fund),
VIG (Vanguard Dividend appreciation fund)
VTI (Vanguard Total stock market fund),
BND (Vanguard total Bond market fund) in the same portfolio for a Roth IRA? And what allocation would be best?
My thoughts are that VTI already has everything that's in VIG and VNQ at market weights. I'm not sure what the goal would be with adding those additional funds (that have slightly higher ERs, more tax considerations, and add a bit of potential decision making/rebalancing that allows for mistakes with the unnecessary complexity). What is it that you think "tilting" to VIG and/or VNQ will do for the portfolio, and what will you do if they don't perform the way you think they will over some future period?

Nobody knows what allocation would be "best" in advance (it's not even clear what "best" means to you, but I'll assume you mean highest returns or highest risk-adjusted return). What you can do, is work out how much exposure to the risks that stocks bring you're willing to be exposed to, and make sure to keep your allocation aligned with that.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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Sandtrap
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Re: Reits and dividend appreciation

Post by Sandtrap » Sun May 26, 2019 9:22 pm

rafkg29 wrote:
Sun May 26, 2019 8:39 pm
Thoughts on VNQ (Vanguard real estate fund),
VIG (Vanguard Dividend appreciation fund)

VTI (Vanguard Total stock market fund),
BND (Vanguard total Bond market fund) in the same portfolio for a Roth IRA? And what allocation would be best?
Question: what do you think is gained by adding VNQ and VIG ???

Simplicity
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grabiner
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Re: Reits and dividend appreciation

Post by grabiner » Mon May 27, 2019 7:07 am

rafkg29 wrote:
Sun May 26, 2019 8:39 pm
Thoughts on VNQ (Vanguard real estate fund),
VIG (Vanguard Dividend appreciation fund)
VTI (Vanguard Total stock market fund),
BND (Vanguard total Bond market fund) in the same portfolio for a Roth IRA? And what allocation would be best?
Is the Roth IRA your entire portfolio? If not, you need to consider how it fits with your other investments; your Roth IRA and 401(k) combined should hold everything you want, but it doesn't matter much what is in which account. (For example, if the bond funds in your 401(k) are better than the stock funds, you could hold all your bonds in the 401(k).)

You are missing international stock, which would give a better diversification benefit to the portfolio than either of the alternative US-based stock funds. And if you do choose to hold real estate, you could also split between VNQ, Vanguard's US real estate index, and VNQI, Vanguard's international real estate index.

Overweighting real estate makes some economic sense; if you hold a total-market index, you hold real estate at its weight in the stock market, which is less than its weight in the economy.

VIG won't give a significant diversification benefit; the performance of VIG and VTI are essentially indistinguishable. If you want to overweight a type of stock, you should have a reason for that overweight, and the type of stock you overweight should have different characteristics (as real estate does). Dividends are a choice made by the corporation, and thus there isn't as much difference among stocks which pay different amounts of dividends (versus, for example, buying back stock).
Wiki David Grabiner

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