How come REIT funds aren't more popular on MMM?

[stlbrah]

I rarely hear discussion of them on here or on other forums, and I am wondering why.

I have a couple in my portfolio, VGSIX for example, and even in a bad year, it still has a 3-4% dividend and a similar expense ratio to a stock index fund. I also have FRESX with fidelity, which isn't as good as the VGSIX on paper, but I figured I would diversify them a bit. These funds killed it last year.

Also, they seem more volatile, but also someone predictable over all. They usually go up in summer from what I have observed, and then drop back down in the winter. I assumed that this was because the warm months are more popular months for real estate. Maybe someone more knowledgeable than myself can comment on that.

Thanks

[Left]

Think there was a post somewhere saying that reits don't actually beat total market index over time. Also the index has reits already

[Wolf359]

There's a real estate forum here.  My guess is that people here lean more towards direct property investing.

Personally, I have a 10% REIT position.  I have it as a diversifier.  It's not always about total return.  Sometimes I just want something that goes the opposite of everything else but still produces a decent return. 

Sure, there are some REITs in Total Stock Market, but I want a bigger tilt than that. 

My only worry is that in a low interest rate environment, many people are buying REITs for the yield.  When interest rates go up and bonds become more appealing, some of the demand for REITs may therefore drop.

I'm not worrying about it too much, though (or I wouldn't have added them in the first place.) 

[Jeremy E.]

http://jlcollinsnh.com/2014/05/27/stocks-part-xxii-stepping-away-from-reits/

[sheepstache]

Well, MMM did write thiss: http://www.mrmoneymustache.com/2011/08/15/become-a-lazy-landlord-with-reits/

[mrpercentage]

Good question. I think REITs are favored more by dividend investors than total return. In general indexers favor total return. REITs can provide a huge income stream over time and increase the yield of your portfolio. They can still be as dangerous as any other stock with some good and some bad.

In general REITs are high yield and a hedge against inflation. I don't plan on even looking at bond until they yield greater than 5%. Then I would consider individual bonds. I heavily favor dividends though and look for yields that increase over time. O is a great example of this. If you look at the yield history you will see the initial investment yielding as much as ten percent while the equity increased by 16% a year. Pretty potent mix. I don't plan on selling so the increasing yield over time is huge. Bonds don't do that.

[Cornbread OMalley]

http://jlcollinsnh.com/2014/05/27/stocks-part-xxii-stepping-away-from-reits/

I read this the other day and it got me thinking about my REIT.

[EarlyStart]

They're very correlated to the stock market, so I don't see it them as much of a diversifier. They're also very tax-inefficient. I'm sure they're fine to own, but I'm not compelled to go out of my way.

[MoonShadow]

I have reits, but mostly lumber reits, as they act a bit different than commercial or residential real estate reits.  That said, I dabble in dividend investing, and a large portion of this forum is committed to the mutual fund path; and many good mutual funds already include positions in reits.

EDIT:  I use reits mostly as a diversifying asset class, like some people here use bonds.  I don't own bonds, I'd rather pay down my mortgage than own other people's debt paying less than I pay on my own.

[MoonShadow]

They're very correlated to the stock market, so I don't see it them as much of a diversifier. They're also very tax-inefficient. I'm sure they're fine to own, but I'm not compelled to go out of my way.

That's why I use lumber reits, as they are not so well correlated to the stock market.  And they are quite tax efficient inside of a Roth IRA.

[aspiringnomad]

They're very correlated to the stock market, so I don't see it them as much of a diversifier. They're also very tax-inefficient. I'm sure they're fine to own, but I'm not compelled to go out of my way.

That's why I use lumber reits, as they are not so well correlated to the stock market.  And they are quite tax efficient inside of a Roth IRA.

I'm intrigued. Can you recommend any in particular? I'm all equities in my taxable accounts, but will be looking to add a REIT to my Roth account in 2016.

[MoonShadow]

They're very correlated to the stock market, so I don't see it them as much of a diversifier. They're also very tax-inefficient. I'm sure they're fine to own, but I'm not compelled to go out of my way.

That's why I use lumber reits, as they are not so well correlated to the stock market.  And they are quite tax efficient inside of a Roth IRA.

I'm intrigued. Can you recommend any in particular? I'm all equities in my taxable accounts, but will be looking to add a REIT to my Roth account in 2016.

I have Plum Creek Timber Company, but I can't make any recommendations right now.  I'm not selling either though.

[Bearded Man]

I've considered VNQ. When compared over it's lifespan to VTSAX, it appeared, at least from what I remember, that it actually beat VTSMX when the dividends are reinvested.