REITS Anyone?

[sengsational]

I'm not sure REITs fall into this hard asset category so well. Will read the Gone Fishin article a few times...

I guess if one observes the price over time of REITs and natural resources equities, they move generally in the same direction. I'm certainly no expert on the topic, but I think I did some research once on it a while back, and convinced myself that it sounded/looked reasonable enough.

 

[panhead]

I would eventually like to have VNQ be about 10% of my overall portfolio. Right now I am using my backdoor ROTH contributions to allocate to VNQ and it accounts for slightly less than 2% of my portfolio. I have two rentals, so if I include the equity in them with my REIT percentage, I'm slightly over 10%. Once the rentals are sold, most of the proceeds will go into the REIT to keep the overall portfolio allocation in the same ball park.

 

[Focus]

Something you might want to keep in mind.

From Q: How useful are REITs in a portfolio? | Less Antman:

"Equity REITs are ALREADY included in many stock index funds. For example, around 2% of the Vanguard Total Stock Market Index Fund is invested in REITs and around 10% of the Vanguard Small Cap Value Index Fund is in REITs."

 

[LOL!]

This may be a dumb question, however, do you buy REITS/ETF's like VNQ and hold them? Or do you buy low, sell high and re-buy. Thanks

Definitely try to buy low, sell high, and re-buy. Or if you like, Buy, Hold, and Rebalance. One can have a set asset allocation to VNQ (say 5%, 10%, 15% of equities) and sell when VNQ grows to be more than say (7.5%, 12.5%, 17.5%) back to that nominal allocation. If VNQ drops enough, one can buy more to top it up.

I last sold VNQ on April 10 as noted in the Market Timing Newsletter thread. It was strictly a rebalancing move.

I'll have to check later, but it looks like VNQ after today's drop is up about the same amount as the VTI ETF that I replaced it with.

 

[Cassie]

Thank you for the responses!

 

[RonBoyd]

Realty Income: This REIT Should Be Part Of Every Dividend Investor's Portfolio - Realty Income Corporation (NYSE:O) | Seeking Alpha

(and, of course, the Comments are equally helpful.)

Not all dividend-paying stocks are equal, however, and while some have very enticing yields, they might not be appropriate for everyone. That being said, there are a few stocks that have no special titles like "dividend aristocrats," but have offered consistent and reliable income for decades, and have such strong business models, that the likelihood of receiving steady, reliable, and increasing dividends for decades to come is superior to most of the other dividend paying stocks available.

Realty Income (NYSE:O) Is My REIT Of Choice

Unfortunately, this stock is not listed in the dividend aristocrat lineup, but over the years has created enormous shareholder value with its dividends alone. It just might belong in a category all its own.

 

[Bryan Barnfellow]

I own a REIT fund and I have since 2007.It is 13% of my Portfolio assets.So,for those owning REITS how did you decide what percentage to allocate to REITS ?I like REITS because it pays dividends and I can participate in Real Estate without having to fix any plumbing problems and do not have to deal with a mortgage.

I own Realty Income (O) and Health Care REIT (HCN) and have a real estate fund as well in my TIAA 403b portfolio. About 10% altogether. I own these in part because I no longer own my home, but rent instead and so wanted some real estate exposure. The allocation was based on my sense of what was appropriate from reading over the years.

BTW, some people consider MCD slanting toward more of a REIT...an interesting take on it.

BB

 

[target2019]

Realty Income Corp (O) dividend is at $2.19 (5.10%). Our yield on cost is about 4.8%.

The disclaimer of course is that REIT is more volatile than other midcap stocks. For example, over the last 5 days O is -5.23%. Other REITS I looked at have similar downs (probably interest rate fears). In same period the overall market is down about 1%. MCD is up 1%!

BTW, I think I read that O will be a dividend aristocrat later this year.

 

[karluk]

The disclaimer of course is that REIT is more volatile than other midcap stocks. For example, over the last 5 days O is -5.23%. Other REITS I looked at have similar downs (probably interest rate fears). In same period the overall market is down about 1%. MCD is up 1%!

I don't think this is true, strictly speaking. According to Yahoo finance, Vanguard's REIT ETF, VNQ, has had a beta of 0.84 over the past three years. This compares to a beta of 1.16 for the mid cap index ETF, VO, over the same period. So in recent years, REITs have been considerably less volatile than mid cap stocks in general.

It's true, though, that VNQ lost over 5% last week, compared to about a 1% loss for VO. This significant underperformance was probably due, at least in part, to interest rate concerns that also hurt bonds and other income producing investments last week.

 

[clifp]

I own Realty Income (O) and Health Care REIT (HCN) and have a real estate fund as well in my TIAA 403b portfolio. About 10% altogether. I own these in part because I no longer own my home, but rent instead and so wanted some real estate exposure. The allocation was based on my sense of what was appropriate from reading over the years.

BB

These are my only 2 two REITs (had a 3rd one for a while.) I thought they were decent size positions, but when I did they math the were only 2.3% of my portfolio. So I treat them as good stocks rather than REIT allocation.

O is one of the very few stocks I have on dividend reinvest, looking back I see that O reached a low of $14.68 in March 2009. At the time the yield was over 11%. My people really were scared back then..

 

[target2019]

I don't think this is true, strictly speaking. According to Yahoo finance, Vanguard's REIT ETF, VNQ, has had a beta of 0.84 over the past three years. This compares to a beta of 1.16 for the mid cap index ETF, VO, over the same period. So in recent years, REITs have been considerably less volatile than mid cap stocks in general.

It's true, though, that VNQ lost over 5% last week, compared to about a 1% loss for VO. This significant underperformance was probably due, at least in part, to interest rate concerns that also hurt bonds and other income producing investments last week.

I checked volatility at http://www.etfreplay.com/charts.aspx
VNQ had higher volatility than VO in the periods I looked at. Maybe a different measure of volatility?

 

[Brat]

I have O and think it is a good stock. Their CEO left recently after many years in that position, they promoted another long time manager to his position. From time to time I have looked for another steady dividend stock and haven't found one that is better.

From time to time I have looked at bulk shippers., particularly NMM Their dividends are very attractive and their stock is down to replacement (scrap?) value but the industry is very cyclical. Were I in my 50s I would be game but I am kicking 75 and don't have the attention span needed to oversee that investment.

 

[target2019]

The article linked below explains REITs very well. Still learning...
http://portfolioist.com/2014/06/03/reits-and-the-rally-of-2014/

In the quote below, I trimmed out the ETF tickers.

"To understand the rally in REITs, it is useful to start with an overview of this asset class.* REITs are neither stock (equity) nor bond (fixed income).* A REIT uses investor money, combined with borrowed money, to acquire real estate.* The properties that they acquire can be office buildings, apartment buildings, healthcare facilities, or even digital data centers.* The returns vary between the*specific types of property*owned.* REITs make money from renting their facilities out.*"

The article is dated Jun 2014.

 

[brownred]

Does anyone think Reits like AAR ARCP, O and VNQ are a little more reasonably priced now?

Thanks

 

[Brat]

I have O and re-invest the dividends so I don't worry about the current stock price. Seeking Alpha has dividend investing commentary.

 

[SVHoper]

I have ~14% of Stock in REIT (VNQ). This was originally performance chasing when I started allocating 100% of 401k to it. However, when I accidentally? kept buying (didn't change buy allocations) through 2008/2009 it turned into a pretty good example of asset allocation working with buy low so through no great intent, REIT allocation did exactly what it was supposed to.

Since about 2011, I haven't added to it as I decided to round out my allocations from 100% small cap and REIT (added a touch of VNQI). About May 2013 big interest rate scare made ~10% drop... I wasn't really watching at the time... Later thought about interest rate sensitivity and market timing and mebe shifting to small cap (less interest rate sensitivity). However, remembered I suck at market timing.

This turned out to be another great "do nothing" decision. During recent drop I bought a tad of small cap, considered REIT but YTD VNQ is still performing better than everything else (up 12%) so didn't think this was such a great buy

So all that blah above goes to say IMHO that if you treat REIT allocation, just like you are supposed to... buy low (possibly sell high if rebalancing) it might well do as advertised and sometimes not move with other allocations in your portfolio. However, if you performance chase, yield chase, market time with my sort of skills and then lack the commitment to buy or even hold when low... you may end up buying high, not benefit from its volatility and worser still sell low.

TLDR: Volatility warning