Thoughts on TIAA Real Estate

[Keim]

I am, more or less, a Boglehead style investor. I have purchased cheap broad market Vanguard index funds for my equity and bond allotments.

We also have access to TIAA CREF funds, and have been investing in TIAA Traditional and Real Estate accounts.

Overall I try to maintain an 80/20 portfolio. I consider Traditional, with its guaranteed minimum income/annuity option, as analogous to a bond, and consider it to be part of my 20% bond allotment.

10% of my money is in TIAA RE. Since it tends to fluctuate differently than the overall market am I correct in thinking of this as an alternative investment, giving me a 70/20/10 portfolio?

And, as long as we're talking TIAA RE, what are your thoughts on this somewhat unique investment vehicle?

 

[Winemaker]

I have been a landlord for almost 25 years and for my family real estate has been a great cash cow and wealth builder. That being said, I also invested in several REITs, as well as, Fidelity Real Estate, and Vanguard's VNQ Real Estate Fund. None were as profitable as my own personal holdings.

I sold off all Real Estate funds in the middle of the pandemic, when the need for office space declined, when folks started working from home. Since then, several office Reits, have allowed some buildings to be seized to the banks as they couldn't make the payments. So I am steering clear of all real estate until things shake out. I, also have my rental properties under contract, as I am getting out while the prices are good for residential properties. It has been a great ride.

For you, I don't think RE is a thing to buy into at this time, JMHO.

 

[Keim]

Im 51, so have some time to wait out while the RE market determinesits new normal.

I have been a landlord for almost 25 years and for my family real estate has been a great cash cow and wealth builder. That being said, I also invested in several REITs, as well as, Fidelity Real Estate, and Vanguard's VNQ Real Estate Fund. None were as profitable as my own personal holdings.

I sold off all Real Estate funds in the middle of the pandemic, when the need for office space declined, when folks started working from home. Since then, several office Reits, have allowed some buildings to be seized to the banks as they couldn't make the payments. So I am steering clear of all real estate until things shake out. I, also have my rental properties under contract, as I am getting out while the prices are good for residential properties. It has been a great ride.

For you, I don't think RE is a thing to buy into at this time, JMHO.

 

[all4j]

I think it depends on how what you use your allocation numbers for. That is, what difference does it make if you have 70/30, 80/20, 70/20/10, or 75/15/10? Is it used to execute rebalancing? Just to gauge risk? Perhaps consider not including it in the allocation. I found it interesting that you consider it as part of your bond allotment, but took it out of the stock number.

It isn’t analogous to either direct ownership of real estate or REITs. It is a variable annuity. In a way, it isn’t unlike social security for someone in their early 50s. It lowers your cash need in retirement, but doesn’t impact your decision now for shifting between stocks and bonds.

I don’t have access to personally investing in this, but did look into a while back for someone. I wasn’t impressed for several reasons. It is popular though & I’m sure it works for some folks

 

[Keim]

I think it depends on how what you use your allocation numbers for. That is, what difference does it make if you have 70/30, 80/20, 70/20/10, or 75/15/10? Is it used to execute rebalancing? Just to gauge risk? Perhaps consider not including it in the allocation. I found it interesting that you consider it as part of your bond allotment, but took it out of the stock number.

It isn’t analogous to either direct ownership of real estate or REITs. It is a variable annuity. In a way, it isn’t unlike social security for someone in their early 50s. It lowers your cash need in retirement, but doesn’t impact your decision now for shifting between stocks and bonds.

I don’t have access to personally investing in this, but did look into a while back for someone. I wasn’t impressed for several reasons. It is popular though & I’m sure it works for some folks

As you point out-it isn't really a stock or a bond. What you saw above is that I include Traditional (in my mind!) as part of my bond allotment. TIAA RE is different yet, so I consider it separately, thus my 70/20/10 allotment.

I will give some thought to your comments about not considering it in my overall stock/bond allotments. Boglehead recommendations typically say to go with broad market stock and bond indexes. And, if you feel the need to specialize in a sector, make it no more than 10%. Since the RE fund doesn't correlate to either a stock or bond, in my little brain, I had been thinking of it along the lines of a sector bet.

Thanks for your thoughts.

 

[Out-to-Lunch]

For reasons similar to your thinking, I treated TIAA RE as a separate asset class. From ~2007, I held something like a 65/25/10 allocation, with an intended glide path to a 45/40/15 allocation at age 65 (i.e., 2028). I also used to slice-and-dice my equities (value tilt). For some reason, in ~2019, I got sick of all that, so I jettisoned the TIAA RE, and went to only broad market indices on the equity side.

I don't have much advice for you, but I understand where you are coming from.

 

[Keim]

For reasons similar to your thinking, I treated TIAA RE as a separate asset class. From ~2007, I held something like a 65/25/10 allocation, with an intended glide path to a 45/40/15 allocation at age 65 (i.e., 2028). I also used to slice-and-dice my equities (value tilt). For some reason, in ~2019, I got sick of all that, so I jettisoned the TIAA RE, and went to only broad market indices on the equity side.

I don't have much advice for you, but I understand where you are coming from.

I am perfectly happy to have people tell me they don't have any advice for me. That tells me one of two things:
Either I am NOT being stupid in how I am thinking of things

OR

We are both being stupid.

 

[Phroig]

I've owned TIAA RE a couple of times for fairly long stretches. It used to be possible to time TIAA RE; this served me well in 2008. I last got out in 2020, because I was concerned about the health of the sector. TIAA RE actually did quite well through much of 2022, but I see it's fallen off that cliff recently. I don't plan to get back in.
Morningstar's TIAA discussion board was a great place to ask questions (and just lurk), but not anymore. Some of those folks are still active on Bogleheads, so you could try there.

 

[pjm-7]

TIAA Real Estate is an account that holds the actual properties. It is not a REIT. Yes, real estate has sucked as of late, however, it is like any sector rotation you may have to wait it out. After the 2008 meltdown they had to revalue properties. That may be going on again. Long term I think that the sector will right itself and go forward. As of 12/31/2022, the account has a balanced sector weightings at 28.3% industrial, 27.0% office, 26.8% apartment, 12.3% retail, and 5.6% other. I hold it since I do not hold any real estate besides my personal residence. The thought of being a landlord has never appealed to me and I just don't have the skills to analyze a property.

 

[target2019]

I am, more or less, a Boglehead style investor. I have purchased cheap broad market Vanguard index funds for my equity and bond allotments.

We also have access to TIAA CREF funds, and have been investing in TIAA Traditional and Real Estate accounts.

Overall I try to maintain an 80/20 portfolio. I consider Traditional, with its guaranteed minimum income/annuity option, as analogous to a bond, and consider it to be part of my 20% bond allotment.

10% of my money is in TIAA RE. Since it tends to fluctuate differently than the overall market am I correct in thinking of this as an alternative investment, giving me a 70/20/10 portfolio?

And, as long as we're talking TIAA RE, what are your thoughts on this somewhat unique investment vehicle?

What I have taken away from many discussions here and elsewhere is that there is freedom to choose how you break down tha allocation. Some are rigid on the asset classes. I place my REIT fund into the stock allocation side, for simplification when posting allocation in threads.

If you describe your allocation as three numbers, then you need to specify what you mean. For example, if I saw 70/20/10 my first guess would be Equity/Income/Cash.

Since TIAA RE is investing in actual properities, it reminds me of Yale Portfolio more than a REIT fund approach. In the Yale model real estate is exactly that.

 

[Nahtanoj]

Based on the information on the TIAA website (including this FAQ -- https://www.tiaa.org/public/pdf/performance/REA_FAQ.pdf), the TIAA Real Estate Account has historically had

* a long-term rate of return about halfway between stocks and bonds
* volatility similar to that of bonds - or even lower
* low correlations to stocks and to bonds

These characteristics make it a potentially attractive addition to a portfolio, and I have been considering adding it to my IRA. (I don't have access through my employer.). For purposes of judging where it falls in the overall risk and return spectrum, I have been thinking of it as comparable to a mix of 50% equity and 50% fixed income, but not highly correlated to either stocks or bonds, and therefore a good diversifier. Hope this helps.