In your Asset Allocation, do you count REIT as Stock vs. Bonds ?

[cyber888]

Based on my readings, REIT is more of a Stock than Bonds, but it pays dividends too .. If you are doing an asset allocation like 70/30, 80/20, 60/40 .. do you categorize REIT as stock or bond ? Thanks.

 

[steelyman]

I place real estate (REITs) as a separate asset class in my allocation and split them 50/50 between stocks and bonds.

 

[audreyh1]

Stock. Ownership in companies that own and operate properties. No maturity date.

Many stocks pay dividends.

Look at history - REITs are quite volatile. It’s true there is some interest rate sensitivity, but in general they behave like stocks and even more volatile and very sensitive to the economy.

I do own them as a separate asset class within my stock allocation for rebalancing purposes. They can be considered as mid-cap stocks and folks owning a widely diversified portfolio will own some already.

In the interest of future portfolio simplification I intend to let this asset class go.

 

[cyber888]

I place real estate (REITs) as a separate asset class in my allocation and split them 50/50 between stocks and bonds.

I was thinking the same thing. Thanks.

 

[steelyman]

I was thinking the same thing. Thanks.

I decided to view them that way after reading A Random Walk Down Wall Street by Burton Malkiel.

My allocation follows a Vanguard target date fund, which publishes stock/bond allocation. I subtract half my allocation to REITs from each and rebalance based on that so my allocation is really stock/bond/REIT.

 

[Cobra9777]

You can see in my signature that I count it separately. But sometimes on this forum, I refer to our AA as 70/30. So I consider it more equity-like than fixed income. Also, equity funds like VTI typically have some REIT in the portfolio. So if you are comparing to other people or benchmarks, you probably want to count REIT in equity for an apples-to-apples comparison.

 

[Spanky]

REIT is considered as stocks.

 

[cyber888]

Stock. Ownership in companies that own and operate properties. No maturity date.

Many stocks pay dividends.

Look at history - REITs are quite volatile. It’s true there is some interest rate sensitivity, but in general they behave like stocks and even more volatile and very sensitive to the economy.

I do own them as a separate asset class within my stock allocation for rebalancing purposes. They can be considered as mid-cap stocks and folks owning a widely diversified portfolio will own some already.

In the interest of future portfolio simplification I intend to let this asset class go.

True. I'm going to watch the real estate market closely, if there's a potential melt down. If that happens, this will really behave like a 100% stock like in 2008-2009. However, I don't think we're there. My brother who lives in CA who bought a house in 2006 at $410K loss his house value in 2009 and the house was only worth $260 in the 2009 housing crisis. Now, it is back to $475k and he is in the process of refinancing it.

 

[audreyh1]

They’ve had super wild swings since I’ve owned the asset class since late 90s. They’ll get way ahead of themselves at times, then suddenly crash hard. I just keep rebalancing.

 

[ESRwannabe]

Based on my readings, REIT is more of a Stock than Bonds, but it pays dividends too .. If you are doing an asset allocation like 70/30, 80/20, 60/40 .. do you categorize REIT as stock or bond ? Thanks.

Their are equity REITs, mortgage REITs, preferred stocks of REITs, and also "hard money loans" which tend to get lumped in there too if you use any real estate crowd funding websites.

equity REITs are clearly common stock imho, and you find them in the broad market cap stock indexes

mortgage REITs could be lumped in with high yield bonds, but I wouldn't do that. they are like banks in that they are companies that make loans. so I would still call them stocks.

preferred stocks of REITs are a hybrid of equity and bonds. imho they are their own asset class. same with convertible securities.

"hard money loans" are clearly bonds imho. The only time I see them lumped in with REITs is at the crowd sourced real estate investments. Quite often 50% or more of those websites are investing in loans, not owning property.

 

[BeachOrCity]

REITS are in "Alternatives" asset class.

Most professionals would recommend you do your AA w/o REITS included and Alternatives in general would be recommended up to 20% of ones portfolio depending on net worth.

Me personally I think alternatives can be up to 30-35% of ones assets if your NW is sufficient that you can afford this type of risk.

Oh, and when you look at the automatic asset allocation engines out there like personal capital, they too include REITS as alternatives.

 

[Gumby]

Rick Ferri's Core Four approach treats them as a class separate from both stocks and bonds.

 

[Nature Lover]

I treat real estate holdings in the portfolio (VNQ, individual REITS, and shares their parent companies) as alternatives.

 

[LOL!]

Every stock in a REIT fund like VNQ is found in the Total Market fund like VTI.

Or just check overlap between VNQ and VTI.

I found this: https://www.bogleheads.org/wiki/Percentages_of_REITs_present_in_Vanguard_index_funds

 

[Closet_Gamer]

I treat it as a separate asset class with its own target allocation.

 

[eytonxav]

I use a separate Alternatives category.

 

[Dtail]

So if one has a separate category and is retired, would one say they are aggressive in their portfolio with 60% stocks and 20% REITS?
I would think yes.

 

[RxMan]

I would say things like REITs or precious metals deserve to be counted separately as an alternative class rather than stocks . The REITs correlation to stocks is about 66% depending on the category . That’s enough of a difference for me to warrant counting them separately. Of course utilities have like a 39% correlation to the broader markets and I still include them in my equity category so it’s really what you want as far as your own allocation.

 

[pb4uski]

REIT is considered as stocks.

I don't own REITS but if I did I would consider them as stocks... a real estate operating company.

 

[DrRoy]

Due to equivalent volatility I consider REITs are stocks.

 

[steelyman]

One of the nice things about portfolio self-management is the freedom to categorize assets however you prefer.

For the purposes of threads like the “YTD Performance” series, most seem to give their asset allocation as stocks/bonds (maybe cash), so I’ve been trying to follow that convention and fold the REITs into it.

 

[target2019]

REITs are in our equity allocation. They seem to grow like weeds, but then suffer a lot in a recession. I measure the allocation just like with small caps. We have a tilt to REITs but try to keep it 5-10%.

 

[mrfeh]

Stock. Ownership in companies that own and operate properties.

+1

Some people put them in their own category, but they definitely aren't bonds.

 

[sengsational]

I would say things like REITs or precious metals deserve to be counted separately as an alternative class rather than stocks . The REITs correlation to stocks is about 66% depending on the category . That’s enough of a difference for me to warrant counting them separately. Of course utilities have like a 39% correlation to the broader markets and I still include them in my equity category so it’s really what you want as far as your own allocation.

+1


The purpose of defining and using different asset classes is because their prices move differently. I call REIT and precious metals "hard assets". Just because a company sells stock doesn't mean the price of the stock will "act like a stock".


I also think foreign entities deserve a category too, especially emerging markets ("domestic" equities have an international component due to the worldwide nature of the big companies).

 

[youbet]

I consider REITS part of my equity AA. I track them within that allocation just as I track small cap, mid cap, large cap, international, etc.