REIT - ARR

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
bugleheadd
Posts: 920
Joined: Fri Nov 29, 2019 10:25 am

REIT - ARR

Post by bugleheadd »

Are REIT supposed to be for income and not growth and goes down in stock price over time? I been in ARR over 7 years and stock price has gone down over 60%. Yes the dividends are ok ,like 11%. But they have cut dividends more often than not. I calc my average annual rate of return to be something like 3%. Did I just make a poor choice and select a loser reit? Would I have done better with an index reit?
User avatar
abuss368
Posts: 27850
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: REIT - ARR

Post by abuss368 »

You won’t find many proponents of buying individual stocks on this forum.

Jack Bogle has often said that investors should not buy individual stocks because of the risk involved.
John C. Bogle: “Simplicity is the master key to financial success."
User avatar
abuss368
Posts: 27850
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: REIT - ARR

Post by abuss368 »

I would consider both the Vanguard US REIT fund and the Vanguard International REIT fund.
John C. Bogle: “Simplicity is the master key to financial success."
Fclevz
Posts: 651
Joined: Fri Mar 30, 2007 11:28 am

Re: REIT - ARR

Post by Fclevz »

It’s not a ‘real’ REIT. That is, it doesn’t invest in actual property, but rather in mortgage-backed securities.

Personally, if I wanted property, I’d invest in REIT that held property. If I wanted mortgage-backed securities, I’d buy GNMA’s. Mortgage REIT’s are beasts that aren’t quite either.
User avatar
abuss368
Posts: 27850
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: REIT - ARR

Post by abuss368 »

Vanguard's REIT funds - both US and International invest in only equity REITs - or REITs that buy individual property.
John C. Bogle: “Simplicity is the master key to financial success."
User avatar
1789
Posts: 2223
Joined: Fri Aug 16, 2019 3:31 pm

Re: REIT - ARR

Post by 1789 »

bugleheadd wrote: Sat Dec 07, 2019 10:54 am Are REIT supposed to be for income and not growth and goes down in stock price over time? I been in ARR over 7 years and stock price has gone down over 60%. Yes the dividends are ok ,like 11%. But they have cut dividends more often than not. I calc my average annual rate of return to be something like 3%. Did I just make a poor choice and select a loser reit? Would I have done better with an index reit?
I think you dont need REITs at all. They are included in total stock market index funds. Please see “Reducing the risk of Black Swans” , one part of appendix is dedicated to REIT research and data. Conclusion: It is not needed as a separate asset in ones portfolio.
"My conscience wants vegetarianism to win over the world. And my subconscious is yearning for a piece of juicy meat. But what do i want?" (Andrei Tarkovsky)
User avatar
unclescrooge
Posts: 6265
Joined: Thu Jun 07, 2012 7:00 pm

Re: REIT - ARR

Post by unclescrooge »

bugleheadd wrote: Sat Dec 07, 2019 10:54 am Are REIT supposed to be for income and not growth and goes down in stock price over time? I been in ARR over 7 years and stock price has gone down over 60%. Yes the dividends are ok ,like 11%. But they have cut dividends more often than not. I calc my average annual rate of return to be something like 3%. Did I just make a poor choice and select a loser reit? Would I have done better with an index reit?
No that's not how they are supposed to work. This is why you shouldn't invest in individual securities.

The are several like VNQ, VNQI, REET... That are indeed funds and have done quite well over the same time frame.
User avatar
abuss368
Posts: 27850
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: REIT - ARR

Post by abuss368 »

1789 wrote: Sat Dec 07, 2019 5:58 pm
bugleheadd wrote: Sat Dec 07, 2019 10:54 am Are REIT supposed to be for income and not growth and goes down in stock price over time? I been in ARR over 7 years and stock price has gone down over 60%. Yes the dividends are ok ,like 11%. But they have cut dividends more often than not. I calc my average annual rate of return to be something like 3%. Did I just make a poor choice and select a loser reit? Would I have done better with an index reit?
I think you dont need REITs at all. They are included in total stock market index funds. Please see “Reducing the risk of Black Swans” , one part of appendix is dedicated to REIT research and data. Conclusion: It is not needed as a separate asset in ones portfolio.
I agree as REITs are included in Total Stock fund and are not required. If an investor would like additional exposure to real estate that is acceptable too.
Last edited by abuss368 on Sun Dec 08, 2019 9:52 am, edited 1 time in total.
John C. Bogle: “Simplicity is the master key to financial success."
AznSaver
Posts: 161
Joined: Sun Aug 25, 2019 5:51 pm
Location: Seattle, WA

Re: REIT - ARR

Post by AznSaver »

bugleheadd wrote: Sat Dec 07, 2019 10:54 am Are REIT supposed to be for income and not growth and goes down in stock price over time? I been in ARR over 7 years and stock price has gone down over 60%. Yes the dividends are ok ,like 11%. But they have cut dividends more often than not. I calc my average annual rate of return to be something like 3%. Did I just make a poor choice and select a loser reit? Would I have done better with an index reit?
To be honest I think you picked a loser REIT... A quick look into it shows that ARR is a residential REIT that invests through mortgage backed securities (MBS). Residential based MBS especially can be quite volatile. REITs/individual stock picks aren't a part of a typical boglehead investment, the wiki can provide background on that.

An investment is usually a pick based on what you want out of it... REITs are typically toted as being for those looking for income as part of the structuring of a REIT requires that 90% of its income taxable income must be paid out. Also the dividends paid are not qualified and subject to ordinary income tax making them tax inefficient.

I have a 10% allocation in my portfolio to REITs mostly in tax advantaged space. The REITs I utilize are either commercial or specialty REITs with a history of increasing dividends. I think of them as a part of my fixed income portfolio and am concerned with overall growth/returns.

Why do you feel the need to have REITs? P.S. Yes an index would have done better...
Post Reply