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REIT allocation
Old 02-23-2021, 08:51 AM   #1
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REIT allocation

I am holding a tiny position in VNQ, it represents about 0.5% of my portfolio. I bought it more than 10 years ago and it certainly has under performed the broad market. For some reason, I know....the psychological biases I have and the need to tinker some, I want to add to this position using fixed income assets. I always try to resist making changes but I am thinking it may have some benefit as an inflation hedge.

Just want to put it out there for feedback. To qualify my current situation, I am a die hard indexer holding more than 90% of my assets in Total US stock market, Total Bond Market, and Total international market indexes. I have a small tilt to small cap holding about 7% in Russell 2000 index fund.

One thing I noticed was that VNQ is holding stocks like American Tower and Prologis so I already have them by being invested in a broad market index. So adding to VNQ would only represent a tilt further to the real estate asset class. I always bounce up against my firm belief that it's a fools errand to try and pick sectors or individual stocks successfully when I have these thoughts.
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Old 02-23-2021, 09:07 AM   #2
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I dabbled in VNQ a bit, but last year I bailed and simplified. REITs just don't do it for me anymore. Look around, we're all seeing skyrocketing home sales, but this doesn't translate to the REIT sector.

No more sectors for me. YMMV, but yeah, it was a fool's errand for me.
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Old 02-23-2021, 09:27 AM   #3
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If you're rebalancing, then having a small position in something that doesn't correlate, in theory, gets you a higher risk adjusted return. The large cap US has been unbeatable, so it's tempting to look back and say "why wasn't I all-in?" but that's probably not the best way to look at it...there will always be a "coulda"
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Old 02-23-2021, 09:42 AM   #4
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As of a few yrs ago, publicly traded REITs had a superior 30-yr performance to the S&P 500.

I haven't checked since then, but I consider VNQ an important part of my holdings.
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Old 02-23-2021, 12:05 PM   #5
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For 0.5% of the portfolio I don't think it's worth the hassle. I held VNQ as 5% of my portfolio. I bought a bunch of shares in late 2008 in the $20-$30 range. That worked out well, though yes it hasn't been very exciting after that.

I just sold the last of our VNQ in January. It was a pain in the taxable account with the weird distributions and the delays it caused in receiving our 1099 tax forms every year.

If you like to rebalance it may still be a good diversifier if you have a decent amount of it.
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Old 02-23-2021, 12:05 PM   #6
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Quote:
Originally Posted by tdv2 View Post
I am holding a tiny position in VNQ, it represents about 0.5% of my portfolio. I bought it more than 10 years ago
I am interested in this thread because I am in the same position -- VNQ is 5.3% of our portfolio and was purchased well over ten years ago. I, too, struggle with what to do with it... every time (every year or so) I decide to dump it but always chicken out. Worse, still I have a smaller position in RWX and go through the same exercise.

Let's see where this thread goes maybe I will gain some insight into my mental instability -- these two are the only tickers I have issue with.
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Old 02-23-2021, 01:20 PM   #7
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For 0.5% of the portfolio I don't think it's worth the hassle. I held VNQ as 5% of my portfolio. I bought a bunch of shares in late 2008 in the $20-$30 range. That worked out well, though yes it hasn't been very exciting after that.

I just sold the last of our VNQ in January. It was a pain in the taxable account with the weird distributions and the delays it caused in receiving our 1099 tax forms every year.

If you like to rebalance it may still be a good diversifier if you have a decent amount of it.

It is an insignificant percentage of my portfolio. I was thinking about adding a couple of percentage points to solve that problem.....if I do, I will add to pre-tax bucket. I hear you on receiving the tax forms....I usually get them in March....same is going to happen this year.
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Old 02-23-2021, 01:29 PM   #8
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I simplified my AA last year and got rid of all my sector/style tilts, including REITs. I found that the tilts didnít add much benefit over a simpler allocation.
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Old 02-23-2021, 04:02 PM   #9
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It is an insignificant percentage of my portfolio. I was thinking about adding a couple of percentage points to solve that problem.....if I do, I will add to pre-tax bucket. I hear you on receiving the tax forms....I usually get them in March....same is going to happen this year.
If it's insignificant, and you don't derive joy from actively trading it, sell it and put the money into what you already own. Have less clutter.
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Old 02-23-2021, 05:33 PM   #10
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In my Roth-IRA I hold VGSLX Vanguard REIT Index Fund Admiral Shares. AA is sitting at 4.5%, and my target is 5.0%.

In taxable I use Realty Income (O) and HTA.

I can hang in there with these investments. They will come back and outperform someday.
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