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Some rebalancing advice please
Old 01-22-2008, 10:45 PM   #1
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Some rebalancing advice please

I have an interest in diversifying some small percentages into REIT and maybe some metals. I have been holding off until it seemed like a good time.

Reading posts about the importance of bond or bond fund total return versus CD or money market interest only return, I think that I should have more of my fixed income/cash in bond funds rather than in MM.

Given the current high prices of gold and silver, I think that it is probably not a good time to get into them and I am in no hurry.

With all of the bad press regarding the real estate meltdown, I am wondering if it makes sense to try to average into the REIT category. I have my eye on the Vanguard VNQ ETF. Is now a good time to be thinking about building a small position in REIT eventually reaching 5% of total assets?

My house which is paid for, is maybe worth 20% or 25% as much as my investment assets, which do not include the house. I saw some posts indicating that this might be enough real estate exposure without the REIT.

With regard to getting more bonds, I have my eye on the Vanguard BND ETF.

I currently am trying for 60% equity and 40% fixed. I have about 15% in I-Bonds (10% at good old rates, 5% at new crappy rates); 5% in FIDO bond index funds and 20% in MM or CD).

I would like to keep 5% in MM as a cushion, so that would mean I would need to buy about 15% or 20% for the BND ETF.

With everyone rushing to bonds, should I hold off and increase my bond vs MM ratio after the equities recover and bonds drop or interest rates go back up?

FYI - my account is with FIDO so if I buy Vanguard it is cheaper to buy ETF than funds and I don't want to open a Vanguard account.

FYI - I am still working and probably have at least 5 years to go before ER.

If I have to pay $15 for the ETF trades, what minimum amount makes sense? I am thinking that $10k is a good increment to average in with.

My sense is that it might be ok to average into the REIT ETF in five or six installments over the next 18 months.

I am thinking that I probably should hold off on the BND, but maybe averaging very slowly might be ok?

Any opinions?

Thanks for the input.
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Old 01-23-2008, 08:33 AM   #2
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Originally Posted by joesxm View Post
I have an interest in diversifying some small percentages into REIT and maybe some metals. I have been holding off until it seemed like a good time.

Reading posts about the importance of bond or bond fund total return versus CD or money market interest only return, I think that I should have more of my fixed income/cash in bond funds rather than in MM.

Given the current high prices of gold and silver, I think that it is probably not a good time to get into them and I am in no hurry.

With all of the bad press regarding the real estate meltdown, I am wondering if it makes sense to try to average into the REIT category. I have my eye on the Vanguard VNQ ETF. Is now a good time to be thinking about building a small position in REIT eventually reaching 5% of total assets?

My house which is paid for, is maybe worth 20% or 25% as much as my investment assets, which do not include the house. I saw some posts indicating that this might be enough real estate exposure without the REIT.

With regard to getting more bonds, I have my eye on the Vanguard BND ETF.

I currently am trying for 60% equity and 40% fixed. I have about 15% in I-Bonds (10% at good old rates, 5% at new crappy rates); 5% in FIDO bond index funds and 20% in MM or CD).

I would like to keep 5% in MM as a cushion, so that would mean I would need to buy about 15% or 20% for the BND ETF.

With everyone rushing to bonds, should I hold off and increase my bond vs MM ratio after the equities recover and bonds drop or interest rates go back up?

FYI - my account is with FIDO so if I buy Vanguard it is cheaper to buy ETF than funds and I don't want to open a Vanguard account.

FYI - I am still working and probably have at least 5 years to go before ER.

If I have to pay $15 for the ETF trades, what minimum amount makes sense? I am thinking that $10k is a good increment to average in with.

My sense is that it might be ok to average into the REIT ETF in five or six installments over the next 18 months.

I am thinking that I probably should hold off on the BND, but maybe averaging very slowly might be ok?

Any opinions?

Thanks for the input.
Surprisingly, nobody has replied to your post yet so I'll give it a shot. Then maybe someone with more investing expertise will chime in.

I have some similar concerns, in that last year I had planned to invest in REIT's when got some $$ to invest. Given recent market events, I feel a little queasy about that. I try not to be a market timer, but on the other hand one just can't ignore the housing meltdown entirely.

What I am planning to do is to wait a few months and then move into REIT's gradually. I think that DCA'ing is the way to go, to soften the risk of putting money in at a short term high and having the value sink a whole lot from there. I will probably do exactly what you propose - - getting into REIT's in installments over the next 18 months.

I don't include my paid-off house as an investment, because I have to live somewhere. Having a paid-off house will just lower my expenses, like a pension or social security would do.

I don't know what to expect from the market, including the bond market. Maybe the economy will recover faster than we think (or maybe not).
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Old 01-23-2008, 07:37 PM   #3
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Is now a good time to be thinking about building a small position in REIT eventually reaching 5% of total assets?
Quote:
With everyone rushing to bonds, should I hold off and increase my bond vs MM ratio after the equities recover and bonds drop or interest rates go back up?
If your asset allocation calls for 5% REIT and more bonds/less cash, averaging in over a set time period, like 6 months or 1 year, is much more psychologically pleasing than attempting to wait for "the right time" to dive in. So, bonds for example, you could do something like 5% now, and then 5% every 2 months until you reach your 15-20% more bonds. That way, you've hedged your bets either way, if bonds tank or if bonds keep doing well. Just remember to write some plan down and stick to it! To quote John Bogle and Carl von Clausewitz, military theorist and Prussian general of the early 19th century: "The greatest enemy of a good plan is the dream of a perfect plan." Same deal with REIT.

$10,000 is probably a good increment to average in with. You can always use Vanguard's Calculate and compare costs for Vanguard ETFs to help you decide.

- Alec
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Old 01-23-2008, 08:02 PM   #4
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What I am planning to do is to wait a few months and then move into REIT's gradually.
Not a bad idea. However, yesterday or this morning was a good time to put money into a REIT ETF.
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Old 01-23-2008, 08:17 PM   #5
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Not a bad idea. However, yesterday or this morning was a good time to put money into a REIT ETF.
Yep, VNQ was up 9.5% today.
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Old 01-23-2008, 08:22 PM   #6
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I topped off my AA of REIT's a short time ago because they were down that far. Now they are a little on the high side. I guess RE is supposed to benefit early from rate cuts. So maybe you missed a good entry point, or maybe another will come along. They are still way down from their peak, but who knows where they'll go from here.

I like VNQ, though I sold it and bought RWR for a tax loss. I'll exchange it back in February. If you look at the charts, most of the RE funds/ETF are very close in performance, so fund selection is not critical as far as I can see.

I don't know that I'd want to DCA into a small amout of VNQ due to the costs. Since you are at Fidelity, look at FRESX. It has a fine long-term performance record that comes really close to VNQ. You could DCA into FRESX and then sell it and buy VNQ after you have been in FRESX long enough to avoid short-term penalties or taxes. No costs for the FRESX and only one transaction into VNQ. Also look at FIREX fo international RE exposure.

Dan
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Old 01-23-2008, 09:17 PM   #7
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Thanks for all the replies.

I agree about the need for a plan. One company I worked at a while ago could never come out with a new product because they always were waiting for the next new great computer chip instead of just using the current one.

I saw the 10% jump today and kicked myself. However, it did not seem as obvious at 10pm yesterday and being stuck at work all day keeps me from placing orders in the daytime.

After seeing some comparison of the Fidelity Total Bond Fund that I had been buying to the Vanguard bond funds (Vanguard for some reason did much better) I decided that I would buy BND. When I thought of REIT I just looked at the Vanguard VNQ and the other couple of ETF's and did not even look for a Fidelity fund. The FRESX idea makes sense. I will look into it. That would allow me to average in with more frequent smaller amounts which would be less stressful.

And thanks for Want2Retire for keeping my thread alive until the other posters arrived.
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Old 01-24-2008, 03:49 AM   #8
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my reit icf had the biggest 1 day gain yesterday of anything i ever owned. up almost 10% and thats a fund . all the reits soared yesterday. thats why i bought it a few weeks ago, when asset classes are beaten down i take the shot. even if im early and it drops more , the wait is usually worth it.

everyone told me i was buying bonds to early last year. rates were still rising towards the end. took the shot got in early and it was a spectacular ride up for tips and longer term bonds.

as they say, you want an asset class in your mix, just do it. forget about waiting for some stupid sign thats all clear. gains usually come from thin air, they are huge and fast. if your on the sidlines deciding when is a good time you will be left behind.

i cant tell you how many people wanted to buy bonds last year but were waiting for the first rate cut. by the time it happened the juciest gains were already gone
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Old 01-24-2008, 08:50 AM   #9
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My REIT fund is IGR. I upped my allocation to 15% when the yield exceeded 9%. The market promptly spanked my ass, and dropped some more. Yield is now over 10%, and that does not include the nice special dividends I've received the past two years since buying.
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Old 01-24-2008, 11:25 AM   #10
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Did anyone else see the $0.18/sh trades for VNQ early Tuesday morning? Looked like a bunch of market sell orders right at the start might have gone without buyers. Or maybe it was just a mistake of some sort. It doesn't show up in the 52 week high/low numbers. Makes me wish for another crash like that...

Dan
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