vanguard reit mutual fund

[veremchuka]

i just finished rick ferri's "all about asset allocation" and after reviewing the retired portfolios and his reasoning i want to allocate 5-8% of total portfolio to the vg reit fund.

reits have had a great run and i'm wondering if this is a bad time to move money from total stock market index? for example, when people here ask about gnma i strongly suggest that now is a bad time - very high nav and interest rates are bound to rise and that'll really drop the nav. the time to buy gnma was 4 years ago.

this would be a permanent allocation for the non correlation to equities not a market timing play, the time for that was apparently a few years ago. is the reit fund teetering on a cliff and it'd be better to wait?

thanks.

btw this will be in roll over ira.

[steelyman]

I've owned that fund since 2005 and have been very satisfied with it. I intend to hold that for the long term as well as Fidelity Real Estate Investment. Both are in non-taxable accounts, as I think that makes things a little simpler. I kept averaging in during '08-'09 and it has worked well.

The reason why I decided to buy these funds was reading the book "A Random Walk Down Wall Street", by Burton Malkiel.

[jerome len]

You never know when the time is right to buy any mutual fund; the same is true of VG REIT. So, if you like the investment and I do, average in over 12 to 24 months.

I've been adding to VG REIT every month for the past 3 years. I intend to keep it far into the future knowing that it will have up and down years. I read Money Mag and Kiplingers each month; both of them have suggested it in the past few months.

Good Luck!

[donheff]

Interesting. I have been considering adding that fund (I currently have no Reits) and was hesitating because of the recent run-up. But, I guess, "if not now when?" applies.

[Lancelot]

I have no idea when is the right time to buy any fund, but I dd just buy into Vanguard REIT...

[Midpack]

I've owned VGSIX continuously since Jun 2005, when I bought it isn't important now but I'm not a trader...

[DblDoc]

If it is part of your long term asset allocation then buy it. Or ask yourself this: If you already owned it would you be selling it now? FWIW I went through the same dilemma in 2006-2007 when setting up my AA. I bought, watched it crash, bought heavily when it was lagging the rest of my AA and watched it grow again. It makes up 5% of my AA.

DD

[WhoDaresWins]

I have had this fund since 2004 in a taxable account. I plan to keep it for awhile longer.

[Free To Canoe]

REIT time to buy?
I like the VGSIX index and have half of my REIT allocation there.
My thinking was like the OP in 2007. REITs had already taken a 17% hit. I bought in then. One thing that I did not know or pick up from other research was how extremely volatile this segment is. Even the index fund. It seems to take bigger jumps than even the emerging market funds. I stuck with it during the downturn (what else could I do?). Mr. Toad's wild ride.

I think that REITs are currently overvalued but many are buying now. I am gradually selling to reduce my exposure.

My 2 cents.

Free to canoe

[tricky88]

I bought ICF (the ishares REIT) in an IRA account in 2006 and have added some to it every year since. Just a few days ago I bought a chunk of the Vanguard REIT too. It was the largest purchase of a REIT I had made since '06 to try to get my asset allocation a little more inline. Alas, five years later of dollar cost averaging and I am still in the red on it by a little. Still, I'm not planning to sell it. Ever.

[Spanky]

As others have said, it's very difficult to time when to enter and exit based on fundamentals or price movement. A big run-up does not necessary indicate overvaluation. I have not heard that a bubble is on the horizon. Even if a bubble does exist, it may take years to burst. In short, there's no magic formula of entry and exit. If REIT is part of your AA, any time is the right time to maintain its targeted level in your portfolio.

[Spanky]

Quote:

Originally Posted by Free To Canoe REIT time to buy? I think that REITs are currently overvalued but many are buying now. I am gradually selling to reduce my exposure.

just curious --- What's your method of assessing the value of the REIT market?

[youbet]

I use the ETF VNG instead of the MF. I also own ICF. I couldn't make up my mind which one to buy when I was setting up DW's rollover IRA, so just split it 50/50. Turns out that after about 2 .5 yrs, they have performed almost identically and very nicely. REITs are about 3% of our total FIRE portfolio and I'm adding whenever some liquidity becomes available to bring that up to the 5% range.

[Free To Canoe]

Quote:

Originally Posted by Spanky just curious --- What's your method of assessing the value of the REIT market?

Good question. I am evaluating my mutual funds by multiplying the PE x the book value to get a number. It is an idea kind of borrowed from Ben Graham. I look at the resulting number to get a relative idea what is happening in each asset class.

The S&P 500 index fund came in at about 28. Other funds a little higher.
REIT funds were around 100.

I know that REITs are different and that there are many ways to value a thing. I am definitely open to suggestions in this regard.

Free to canoe

[veremchuka]

thanks. yes, i want to keep this as part of the portfolio, it is not a buy the hot thing move.

i like the dca BUT the $ will be coming from my tsmi in my rollover ira. vanguard's policy is exchanging out of a fund means you can't put $ into that fund for 60 days. i don't like being limited in any way so that makes dca every 90 days puts the tsmi fund into a "locked up" for 1 year situation. if i needed to rebalance (moving $ into tsmi) i can't.

maybe a lump sum would be better. i've often read that when looking back at results, lump sum vs dca, the lump sum method performed better. the reasoning is the stock market goes up more than down.

[steelyman]

You could always move a lump sum into something like their Prime Money Market fund and then average out of that one, not Total Stock Market.

[veremchuka]

yes that is true but i ignored that as i do not like parking a large amount of money in the PMM fund, what's it paying now 8, 12 basis points!

[Spanky]

Quote:

Originally Posted by Free To Canoe Good question. I am evaluating my mutual funds by multiplying the PE x the book value to get a number. It is an idea kind of borrowed from Ben Graham. I look at the resulting number to get a relative idea what is happening in each asset class. The S&P 500 index fund came in at about 28. Other funds a little higher. REIT funds were around 100. I know that REITs are different and that there are many ways to value a thing. I am definitely open to suggestions in this regard. Free to canoe

I heard that price/funds from operations (income + depreciation + mortgage amortization - sales of property) is one metric to use. Historical multiple is about 12x. I am not sure how one could get the data for the calculation. Another one is yield comparison to 10-year treasury.

[steelyman]

Quote:

Originally Posted by veremchuka yes that is true but i ignored that as i do not like parking a large amount of money in the PMM fund, what's it paying now 8, 12 basis points!

Right, I understand. It's been a long time since I dumped a full investment into a mutual fund all at once (not since I first started in the mid-90s), and it did end up working out OK, I think about a 600% return, but it took 15+ years.

I guess the main reason why I would dollar cost average into the VG REIT fund is that it's really a volatile fund, which I suppose is due to its specialty nature. It's not going to behave like a broader market index fund.

[In-control]

This is tough call, for comparison I am in VG Wellington & Wellsley funds and if you look at their holding you will find REITs and property management companies. Look at your current holdsing and you may find that you are already exposed to the market segment.