Diversify with stock in my employer's company? It's a REIT.

[MVal]

What is the general consensus on investing in REITs? My employer is one of the biggest publicly traded REITs out there and I am wondering if I should buy some of their stock. However, is it best to do that with my Roth or after-tax dollars? Can you invest HSA funds in a REIT?

I've currently got all of my Roth in Vanguard's Target 2045 fund. Just wondered if this would be the best place to dip a toe into this.

[Aphalite]

General consensus is if you are getting some kind of deal, like a discount or some kind of match, that it'll juice returns to do it then allocate it somewhere else later once you've gotten the bonus

Any REITs should be held in tax advantaged accounts to reduce taxes

[forummm]

If you're getting it 40% off or something, yes. If you're not getting it discounted (or with a special tax benefit somehow), then no. You don't want to tie your portfolio's success into where you get your income from. If the company goes bust, you're double screwed. It's not "diversification" to put a bunch of money in one stock. And your company's REIT will be in the index funds you already own. REITs are about 5% of VTSAX for example.

[hodedofome]

If you're getting it 40% off or something, yes. If you're not getting it discounted (or with a special tax benefit somehow), then no. You don't want to tie your portfolio's success into where you get your income from. If the company goes bust, you're double screwed. It's not "diversification" to put a bunch of money in one stock. And your company's REIT will be in the index funds you already own. REITs are about 5% of VTSAX for example.

Bill Gates has been selling his Microsoft stock since the '90s for this very reason.


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[Mississippi Mudstache]

Any REITs should be held in tax advantaged accounts to reduce taxes.

I will probably sound like a broken record, but any time anyone mentions this, I will add that timber REITs (PCL, WY, RYN, and PCH) make it a point to pay out dividends as capital gains or return of capital instead of income. For the many investors who pay little/no capital gains taxes, there may be no advantage for holding these companies in a tax-advantaged account.

It's possible that other types of REITs may have similar benefits, but timber REITs are the only ones that I am knowledgable about.

[Aphalite]

I will probably sound like a broken record, but any time anyone mentions this, I will add that timber REITs (PCL, WY, RYN, and PCH) make it a point to pay out dividends as capital gains or return of capital instead of income. For the many investors who pay little/no capital gains taxes, there may be no advantage for holding these companies in a tax-advantaged account.

It's possible that other types of REITs may have similar benefits, but timber REITs are the only ones that I am knowledgable about.

That's a good point, structure matters. MLP also provides the same structure.

One counterpoint is, once you write your cost basis down to zero, distributions as return of capital becomes taxable at your normal income rate, which could be as low as 0% or as high as 39%. Something to consider

[forummm]

If you're getting it 40% off or something, yes. If you're not getting it discounted (or with a special tax benefit somehow), then no. You don't want to tie your portfolio's success into where you get your income from. If the company goes bust, you're double screwed. It's not "diversification" to put a bunch of money in one stock. And your company's REIT will be in the index funds you already own. REITs are about 5% of VTSAX for example.

Bill Gates has been selling his Microsoft stock since the '90s for this very reason.


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Last time I checked he had sold 700 million shares! And has just been taken over by Ballmer as the single largest shareholder with about 300 million left.

[hodedofome]

I read a really good article about Gates' investment manager. He had pretty much everything outside of his MSFT stock in bonds since not only was Gates concentrated in 1 company, his entire net worth was also in equities which at the time were extremely overvalued. As they sold off stock he would begin to buy other companies. I believe he's achieved ~12% return since he took over Gates' investments in the late '90s. A very respectable return considering he's run a diversified portfolio and MSFT has returned crap since '00.


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[MVal]

The specific REIT I am looking at is HCN. We do healthcare real estate.

[forummm]

The specific REIT I am looking at is HCN. We do healthcare real estate.

That is in the S&P 500. So any index fund that tracks that index (such as VFIAX) or any total market index (such as VTSAX) holds that in the portfolio.