[REITs ETFs] iShares REET (NYSE) or iShares IWDP (LSE) for NRA?

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Topic Author
thibaulthib
Posts: 48
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[REITs ETFs] iShares REET (NYSE) or iShares IWDP (LSE) for NRA?

Post by thibaulthib » Tue Jun 25, 2019 6:50 am

Hello BH!

In order to diversify slightly more my portfolio, I'm contemplating investing 5% of it into a REIT ETF.

Based on the fact that I'm a NRA, I should go for iShares IWDP (LSE): https://www.ishares.com/uk/individual/e ... -ucits-etf

However, when I'm looking at iShares REET (NYSE), it seems that its yield after tax may be better than IWDP: https://www.ishares.com/us/products/268 ... l-reit-etf

For IWDP:
- Distribution yield: 3.38%
- Expense ratio: 0.59%
- US-based exposure: 56%

For REET:
- Distribution yield: 4.07%
- Expense ratio: 0.14%
- US-based exposure: 65%

Even though I followed https://www.bogleheads.org/wiki/Nonresi ... Irish_ETFs about the L1TW and L2TW, it seems like REET, though US-based REIT, provide a better after-tax annual yield.

Can someone confirm (or not) that I'm right?

Thanks!

Schlabba
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Re: [REITs ETFs] iShares REET (NYSE) or iShares IWDP (LSE) for NRA?

Post by Schlabba » Tue Jun 25, 2019 1:16 pm

Hello,

Yield is not a constant, so the numbers on the website might be the other way around next year. Just ignore yield all together and think of total return instead.

I wouldn’t invest in the US based one because of the tax. I wouldn’t invest in the IWDP because of the high expense ratio.

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BeBH65
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Re: [REITs ETFs] iShares REET (NYSE) or iShares IWDP (LSE) for NRA?

Post by BeBH65 » Thu Jun 27, 2019 1:08 am

Reit stocks are already included of most index (funds). So by adding them double you need to ask yourself if you are diversifying or concentrating your investments.

First decide which reits you want:
- US reit? Regional? Worldwide?
- Residential/industrial
- ....

Then choose the fund that best approaches your choice.
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence). | Have a look at https://www.bogleheads.org/wiki/Outline_of_Non-US_domiciles

Topic Author
thibaulthib
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Re: [REITs ETFs] iShares REET (NYSE) or iShares IWDP (LSE) for NRA?

Post by thibaulthib » Tue Jul 09, 2019 12:24 pm

BeBH65 wrote:
Thu Jun 27, 2019 1:08 am
Reit stocks are already included of most index (funds). So by adding them double you need to ask yourself if you are diversifying or concentrating your investments.

Then choose the fund that best approaches your choice.
Agree that there is a bit of REITs in IWDA and WSML, but it still remains very low, as in 3 or 4% if I recall.

Is there a need to diversify more than that into REITs, or investing in IWDA/EIMI/WSML is enough tho?

danielbird193
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Re: [REITs ETFs] iShares REET (NYSE) or iShares IWDP (LSE) for NRA?

Post by danielbird193 » Tue Jul 09, 2019 2:58 pm

I get a small amount of global REIT exposure from a holding in the HSBC FTSE EPRA/NAREIT Developed UCITS ETF (ticker = HPRD). It's domiciled in Ireland, traded in London and has a total expense ratio of 0.40%.

Opinions vary about whether REIT exposure is helpful or not, but it sounds like your mind is already made up on that point. If you want to tilt your portfolio that way, this would be an alternative way of doing it.

andrew99999
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Re: [REITs ETFs] iShares REET (NYSE) or iShares IWDP (LSE) for NRA?

Post by andrew99999 » Tue Jul 09, 2019 9:18 pm

Apparently before the GFC it was popular to have 10% of equities in REITs as a diversifier, but after the GFC, it became seldom mentioned. My guess is that there is nothing special about REITs since they are essentially just another sector of stocks, so market cap weight is good enough.

Topic Author
thibaulthib
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Re: [REITs ETFs] iShares REET (NYSE) or iShares IWDP (LSE) for NRA?

Post by thibaulthib » Wed Jul 10, 2019 9:29 am

Thanks Daniel and Andrew!

Funny that the HSBC one (https://www.justetf.com/servlet/downloa ... UK&lang=en) is not in the following JustETF list: https://www.justetf.com/uk/find-etf.htm ... ld&ls=XLON

But I guess it may correspond to one of the 6 attached.

Do you think that only 5% in REITs is worth it, such as having:
- IWDA: 75%
- EIMI: 10%
- WSML: 10%
- REITs: 5%

OR

- IWDA: 80%
- EIMI: 10%
- WSML: 5%
- REITs: 5%

Or it is really starting to make it to difficult and not worth?

Thibault

andrew99999
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Re: [REITs ETFs] iShares REET (NYSE) or iShares IWDP (LSE) for NRA?

Post by andrew99999 » Wed Jul 10, 2019 9:59 am

thibaulthib wrote:
Wed Jul 10, 2019 9:29 am
Do you think that only 5% in REITs is worth it
Or it is really starting to make it to difficult and not worth?
Yeah that's why I don't bother.
If somehow the index was REIT-free, I would add a 10% allocation, but adding just 5% seems so borderline whether it will make any difference that if the choice is so close that it probably won't make much difference either way, I went for simplicity.
Doesn't mean it's "right", just what I decided on.

Topic Author
thibaulthib
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Re: [REITs ETFs] iShares REET (NYSE) or iShares IWDP (LSE) for NRA?

Post by thibaulthib » Wed Jul 10, 2019 10:41 am

Thanks Andrew,

Indeed WSML has 11.42% Real Estate, EIMI has 3.60% and IWDA has 3.27%.

That's why I believed 5% of top-up from a proper REITs ETF may be interesting, but as you said, is it a good idea or not... Good question!

danielbird193
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Re: [REITs ETFs] iShares REET (NYSE) or iShares IWDP (LSE) for NRA?

Post by danielbird193 » Wed Jul 10, 2019 4:56 pm

For what it's worth, I have roughly 10% in REITs (of which half in the HSBC ETF, and half in an actively managed UK REIT which I've been invested in for a long time and which I'm happy with).

I guess pure Bogleheads would say follow market cap weighting, choose the lowest cost funds possible, set your allocation and stay the course. That would imply no allocation to REITs.

That said, on the backtesting I've done, adding my chosen REITs at the weightings shown above has contributed to returns while not adding additional volatility.

As to what happens in the future, no one knows. However based on performance to date I'm happy to have 10% of the portfolio in what I consider to be a separate asset class. If nothing else, the dividend income can be useful when it comes to my annual rebalance. (I don't necessarily reinvest the dividends in REITs, just allocate them to whichever part of my allocation has become underweight).

Topic Author
thibaulthib
Posts: 48
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Re: [REITs ETFs] iShares REET (NYSE) or iShares IWDP (LSE) for NRA?

Post by thibaulthib » Thu Jul 11, 2019 7:21 am

danielbird193 wrote:
Wed Jul 10, 2019 4:56 pm
For what it's worth, I have roughly 10% in REITs (of which half in the HSBC ETF, and half in an actively managed UK REIT which I've been invested in for a long time and which I'm happy with).
Hi Daniel,

From the factsheet, I see that the HSBC one got the below charges on top of the 0.40% of mgt fee, can you confirm?

One-off charges taken before or after you invest
Entry charge 5.00%
Exit charge 5.00%

danielbird193
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Re: [REITs ETFs] iShares REET (NYSE) or iShares IWDP (LSE) for NRA?

Post by danielbird193 » Fri Jul 12, 2019 3:26 am

I am looking at the factsheet at the link posted below which confirms "Entry / Exit / Performance fees = No". I certainly didn't pay 5% when purchasing it through my UK based broker (AJ Bell YouInvest)!

https://www.google.com/url?sa=t&source= ... oQZJvut10x

Topic Author
thibaulthib
Posts: 48
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Re: [REITs ETFs] iShares REET (NYSE) or iShares IWDP (LSE) for NRA?

Post by thibaulthib » Fri Jul 12, 2019 6:45 am

Thanks Daniel!

Weird that the below links gives different info then while they both come from HSBC itself: https://www.justetf.com/servlet/downloa ... UK&lang=en

danielbird193
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Re: [REITs ETFs] iShares REET (NYSE) or iShares IWDP (LSE) for NRA?

Post by danielbird193 » Mon Jul 15, 2019 8:06 am

Hi, yes I was confused at first but the key sentence is the first bullet point next to the table showing entry and exit charges of 5%:

"No entry or exit charge is payable where shares are purchased/sold on a stock exchange. Investors need only pay any relevant broker and stock exchange fees and commissions."

So I guess the 5% fee only applies if they issue new shares.

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