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Why not more REIT, and Forbes
Old 04-22-2010, 09:32 AM   #1
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Why not more REIT, and Forbes

2 questions,

1. I am 20 and have been investing for one year and so far all of my money has gone into Total Stock Market Index until I figure out my proper asset allocation. I know most of the Boglehead advice you'll see advocates at the most 10% of your assets to REITs, but looking at the long term outperformance of Vanguard's REIT index why not put in as much as 20% of your total portfolio?


2. I asked for a subscription to Forbes magazine for Christmas and while I have enjoyed it, are there any less well known magazines out there that you guys enjoy more?

Thanks in advance for your answers.
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Old 04-22-2010, 09:39 AM   #2
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REITs are troubled these days with all of the housing bubble and foreclosures looming. Perhaps the market has discounted the troubles but who knows. At first glance they look great in terms of cashflow etc. But underlying many of these issues are problems.

They could bounce back in a couple of years and then you could boast of your superior investing ability as prices recover. Or the opposite could happen.

In terms of 10 or 20 percent of a portfolio, I'll leave that to others to pontificate upon. I'll just say that if REIT prices recover dramatically then you should have had lots of them in your portfolio. If they don't recover or go down in flames then 10 % is way too much.
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Old 04-22-2010, 09:47 AM   #3
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I like Kiplinger's. No nonsense, generally sensible advice.
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Old 04-22-2010, 09:49 AM   #4
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REITs are troubled these days with all of the housing bubble and foreclosures looming.
They are? Mine is up >16% YTD - second highest performer in my portfolio.

To OP: I would never put more than 10% of my portfolio in REITs. Probably not more than 5%, actually. I don't think REITs are that important a diversifier. International equities are far more important. Mid-caps already contain some REITs so your total stock market probably has some.

Audrey
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Old 04-22-2010, 09:56 AM   #5
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I have been a fan of individual REITs for many years, and at times (late 1998-late 2005) have had allocations as high as 100% to them as a result of them having solid, steady, growing fundamentals and low valuations while the rest of the market was highly overvalued (all IMHO).

However, none of these 3 conditions are true now - REIT fundamentals are shaky at best and growing unsteadily if at all, valuations are considerably higher than back then, and valuations of many other high quality companies are reasonable. This is not to say you might not make (or lose) a lot of money with REITs, just that the deck is no longer stacked heavily in their favor. I have not owned any for years now, and see no reason to overweight an asset allocation based portfolio towards them.
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Old 04-22-2010, 12:15 PM   #6
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I think REITS are a great tool for diversifying a portfolio and especially for someone looking for income. The vanguard REIT index is a good way to get into them, especially if you don't want to go to the trouble of researching individual securities. I like Cramers advice not to buy your total position at once, but to ease into a position. That said, I am currently overweighted in REITs and plan to stay that way at least until evidence that the economy is tanking. If it stays at current level or improves, overall the REIT index should do well.
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Old 04-22-2010, 12:57 PM   #7
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2. I asked for a subscription to Forbes magazine for Christmas and while I have enjoyed it, are there any less well known magazines out there that you guys enjoy more?

Thanks in advance for your answers.
I like reading the Journal of Financial Planning online at Journal of Financial Planning — Financial Planning Articles & Resources and Financial Advisor at FA Magazine. And I read almost all links to articles posted in this forum . It is great when you have so many eyes looking for useful articles on the web.

I browsed through "Smart Money" in the library yesterday and was not impressed.
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Old 04-22-2010, 01:44 PM   #8
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Thanks for all the answers.
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Old 04-22-2010, 04:20 PM   #9
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The magazine I love, although not an investment magazine is The Economist. DW calls herself 'an Economist widow' , subscribed for 30+ years now. Sometimes get useful information out of Barrons and The Financial Times.
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Old 04-22-2010, 04:58 PM   #10
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And I read almost all links to articles posted in this forum . It is great when you have so many eyes looking for useful articles on the web.
If you follow this advice, you will find that you never need any other source for useful information. So, keep your money out of the pockets of "professional" advisors and, then, buy more stocks.
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Old 04-23-2010, 11:29 PM   #11
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They are? Mine is up >16% YTD - second highest performer in my portfolio.

To OP: I would never put more than 10% of my portfolio in REITs. Probably not more than 5%, actually. I don't think REITs are that important a diversifier. International equities are far more important. Mid-caps already contain some REITs so your total stock market probably has some.

Audrey
Do international equities still function as a diversifier? When I was playing around with my spreadsheets for the asset allocation tutorial thread, REITs seemed to have much more of an effect than international stocks. I just went back and looked at my base data, and I think I see why. For the period from 1980 to 1999, the correlation between US and non-US equities was 0.33, but by the period from 2000-2006 (the most recent data I had) it had gone up to 0.96; the correlation between REITS and US equity was 0.39 and 0.87 respectively, during the same two periods. Doesn't that correlation of 0.96 mean the diversification value of non-US stocks over the last decade or so was essentially nil? Am I missing something?
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