This is the OP checking in again. This continues to be a very interesting discussion.
Throughout this topic, several posts just say, "real estate is not a bond". I'll quote a couple of these posts below (by no means the only posts saying this throughout the topic). However, I don't think that exactly answers my OP, which was phrased as a question about my Asset Allocation. To expand on this as I reply to some of these quotes...
short answer, no
real estate is not a proxy for bonds. It is another asset altogether. That does not mean that it is not a good asset to hold.
I would suggest figuring what you want your asset allocation needs to be and not try to make assets fit match other categories.
Figuring out what my AA needs to be is exactly what I'm trying to do. But one way to get there is to compare my current AA to what I perceive is the generally recommended one. Then I ask questions like, why is the recommended one recommended? Do I need to change from mine to the recommended one? These questions tend to lead to the comparisons of asset classes.
I just cannot get my head around all the RE investors who are trying to wrap their head around RE being 'similar' or 'the same as' or whatever word used to a bond... why? so you can say you are invested in bonds?
It is NOT a bond... period...
You keep trying to pound a square peg into a round hole and say it fits....
Live with the fact that it fits your needs and be done with it...
In fairness to this quote, I believe it was in response to other specific replies in this topic. Some of these replies are extremely analytical in discussing the detailed characteristics of RE vs stocks vs bonds. But in doing all that analysis, I hope that the folks replying do not miss the point of my original question. To get back to what I said in my OP: I have been trying to get my head around AA as I will transition soon into retirement. There seems to be a widely recommended 60/35/5 split among monetary/liquid type assets. In my OP, I basically asked the question, do I need to move some of my assets into bond assets to match this recommended split? Or not?
My thinking is, I'm leaning towards "or not". I don't think I would want to keep a 90% stock portfolio in retirement if I didn't have any RE. But with RE in the mix, some of the reasons people own bonds (e.g. diversification from stocks and reliable income in a down stock market), are some of the same things I perceive RE giving me. It doesn't mean RE has all the exact same characteristics as bonds or that RE is a bond. But maybe RE has *enough* similar characteristics that it limits the risk I would otherwise have of keeping 90-95% stock portfolio in the monetary/liquid part of my portfolio.
The question was not if real estate is a bond, but if real estate could be substituted for bonds. In many cases, mine included, it can be.
That is being very specific... in general (the vast majority of people) it is not a bond substitute... so if it is not generally viewed as a bond substitute I will take that as the answer...
As an example.... would you recommend someone who is 70 and invested 50/50 to take all of their bond money and go buy RE? Even if they hired a manager to take care of all of the problems and all they got was a check? If you did I think you could be sued for that advice....
If you want to put it in as one that is fine.... but I still say square peg, round hole...
I think "Another Reader" came closer to the meaning of "substitute" I intended in my OP. I posed the question about my own AA, not someone else's. I wasn't suggesting for someone who is 70 and holds no RE to go out and buy some, but rather I was asking if I, who already hold more than 50% of my retirement assets in RE, need to sell either some of my RE or some of my stocks and buy bonds in order to fit the classically recommended 60/35/5 monetary asset split.
If the answer is, "Live with the fact that it fits your needs and be done with it" (as Texas Proud posted previously) - i.e. I do *not* need to transform my AA in order to hold a lot of bonds - then, that means that RE is in some sense a "substitute" for bonds, at least in my own portfolio (which is the portfolio I was asking about in my OP).