Too late for REITs...again?

[mickeyd]

It seems that I read a simular article a couple of years ago about REITs, however mine have continued to increase in value. In fact, I'm still contributing to my REIT fund via my Roth each month. Are REITs ready to finally take a dive?

Research has demonstrated that REITs can add return while reducing risks, even for fixed-income portfolios, since the correlation between equity REIT returns and other stocks and bonds is relatively low. REIT yields are noticeably better than those of stocks, although down considerably from a few years ago.

But do your homework. While some experts say REITs still seem capable of generating decent returns for another couple of years, others say the sector is showing signs of slowing, and it may be a little late in the cycle.

http://www.bankrate.com/brm/news/investing/20061110_REIT_yield_return_a1.asp

 

[justin]

I "missed the boat" so to speak 1.5 years ago when setting my asset allocation policy. I figured REITs were too pricey to include at the time and weren't worth the gamble. Oops. I still feel that way.

Although I believe the small cap value index includes approx. 30% REITs in the index. So I may actually have a small REIT allocation via the small cap value index fund.

If REITs crash, I may add them to my allocation in small portions. I'm already at 9 asset classes as is, why not make it 10?

 

[Cut-Throat]

I remember getting into the Vanguard REIT index about 3 years ago thinking that it was pricey. I held my nose and did it. I have rebalanced and basically pulled my initial investment out of it.

 

[saluki9]

I remember getting into the Vanguard REIT index about 3 years ago thinking that it was pricey. I held my nose and did it. I have rebalanced and basically pulled my initial investment out of it.

I think its only fair you should get a vanity plate for your new Lexus as VGSIX

 

[Spanky]

I have no idea of when REITs will ever take a dive. I started investing in a REIT fund three years ago. The return has been great. However, I have decided to liquidate my holdings because of low yield. I may regret this decision someday.

 

[Gone4Good]

I sold most of my REITs last year. At the time valuations seemed silly. Furthermore an investment banker friend of mine who not only specializes in REITs but also is good friends with many of the large REIT CEOs informed me that all of the insiders he knew were selling. Seemed like a smart thing to punt REITs too. A year later they've continued to defy both expectations and gravity. Serves as a reminder why I try not to time the market - most of the time I even succeed. If you're wondering, the word is that insiders are still bearish on their own stocks - for whatever that is worth.

 

[Alex]

I say: If your asset allocation calls for a certain percentage of reits, then you should buy them or sell them to maintain that allocation. Nobody knows what will happen in the future. That is the beauty of setting an AA and rebalancing. You don't need to worry about your investments. The emotion is taken out of it for you. Reits would have to drop 90% for me to lose any money or sleep over them, and I doubt that's gonna happen.

 

[Cut-Throat]

I say: If your asset allocation calls for a certain percentage of reits, then you should buy them or sell them to maintain that allocation. Nobody knows what will happen in the future. That is the beauty of setting an AA and rebalancing. You don't need to worry about your investments. The emotion is taken out of it for you.

Amen!

 

[audreyh1]

Ditto that cool Amen emoticon!

Gosh - so many years now people have been scared out of REITs - just so sure they have an impending crash. A lot of people have missed the boat. This is a great lesson in asset allocation.

I've trimmed, and trimmed and trimmed to keep REITs in balance. They've amazed me for the last couple of years. But I'm glad I didn't try to outwit my portfolio allocation and cut way back in anticipation of a correction.

Now - they might correct and it could be soon. But we just don't know. It could be later, or they might not drastically correct in the way people think either. Asset classes usually confound the most people.

The last time REITs had a severe correction was during the 1999 and 2000 time frame. You could look at the conditions back then to try to figure out what characteristics of economy/markets made REITs vulnerable (certainly overbuilding of commercial properties was part of it, but there also had been a "boom" in the creation of REIT stocks and who knows what other factors).

I'm not worried about it. When they finally correct, I'll get to buy more at a better price.

Audrey

 

[heyyou]

Mickey- You've received some excellent advice. Maintain your SET allocation by rebalancing. Trying to time the market and calling that rebalancing is not recommended.
If you are diversified, some asset class is always on the verge of falling. Sometimes they take turns, sometimes all at once. The damn markets just keeps fluctuating. If they didn't, there would be little risk, and little return. By staying with your allocation for 20-30 years, you avoid major timing mistakes and get to buy a little more at market lows. You do have to live with the variable returns. Over long periods, every asset class has some good, and some bad years, but all have had decent returns except for the Japanese. Our financial and accounting industries are less concerned about "saving face" here so the pain is quicker and the recovery is quicker.
Joe