Author Topic: Putting ~10% of my net worth into REITs... good or bad idea?  (Read 4349 times)

blizeH

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Putting ~10% of my net worth into REITs... good or bad idea?
« on: April 23, 2015, 02:49:59 AM »
Hi,

Of our investments, I'd say we're probably at something like 25% property, 35% stocks and 40% cash/bonds.

I know I need to bump the stocks up considerably, but was wondering if it'd be worth putting money into REITs also?

Specifically these:

https://personal.vanguard.com/us/funds/snapshot?FundId=0123&FundIntExt=INT
https://www.ishares.com/uk/individual/en/products/251802/ishares-uk-property-ucits-etf

After that, it'd be something like 25% property, 35% stocks, 10% REITs and 30% cash - with the intention of then focusing mostly on bumping up the stocks.

Any thoughts please? Thanks :)

dcunitedfan

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Re: Putting ~10% of my net worth into REITs... good or bad idea?
« Reply #1 on: April 23, 2015, 05:42:55 AM »
The percentage of REIT relative to stock seems a little high.  Personally of all of my stocks, about 10% of them are REITs.  If you google around, you'll find recommendations anywhere between 5-20%.  I'm not sure what your property represents - your residence or investment properties - if investment properties than you already have a significant amount in real estate, and going higher starts feeling overweighted/less diversified to me (of course everyone has to decide for themselves). 

blizeH

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Re: Putting ~10% of my net worth into REITs... good or bad idea?
« Reply #2 on: April 23, 2015, 08:31:16 AM »
Thank you, sorry I wasn't very clear - the property is just an investment (one house that we rent out)

But good point about possibly being a bit overweight on property. Thanks again!

thedayisbrave

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Re: Putting ~10% of my net worth into REITs... good or bad idea?
« Reply #3 on: April 23, 2015, 08:53:26 AM »
I have 10% of my stocks in REITs.  I also have 2 rental units.  Some would argue that I'm too heavily in real estate since I have both REITs and investment property, but IMO, while they are similar they are not the same.  REITs are liquid and mostly commercial properties (the Vanguard REIT index is only about 16% residential) while physical properties are illiquid and tangible.  I am comfortable having my money in both and I sleep great at night, so really it's just up to you and what you think you are comfortable with.

MooseOutFront

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Re: Putting ~10% of my net worth into REITs... good or bad idea?
« Reply #4 on: April 23, 2015, 09:05:36 AM »
10% of my investment asset allocation is in REITs.  All of my assets are stocks and cash and I have no rentals, but I view the REITs differently than I would a single family residence even if I did have a couple.


Wolf359

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Re: Putting ~10% of my net worth into REITs... good or bad idea?
« Reply #5 on: April 23, 2015, 09:35:32 AM »
10% of my investment asset allocation is in REITs.  All of my assets are stocks and cash and I have no rentals, but I view the REITs differently than I would a single family residence even if I did have a couple.
+1

I own my house and have a rental, but I still did the 10% REIT allocation. 

I am not going to be a real estate tycoon.  It's too much hassle.  I'm not getting rid of my rental house, but the REIT is much better diversified nationally.  I know I have REITs in Total Stock Market, but I want to tilt that way.  I would not exceed 10%.  I might do 5% US REIT and 5% Ex-US REIT, but I'm taking it slow.

Runge

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Re: Putting ~10% of my net worth into REITs... good or bad idea?
« Reply #6 on: April 23, 2015, 09:54:08 AM »
OP, not sure if you've read these yet or not, but here's some good material out there that addresses asset allocation including REITs. It doesn't necessarily address personal RE investments vs. REITs unless I missed it. I haven't really researched that discussion very much as I don't own RE outside of REITs. According to my personal IPS (http://www.bogleheads.org/wiki/Investment_policy_statement) my REIT allocation is 10%.

https://advisors.vanguard.com/iwe/pdf/ICRPC.pdf (PDF)
http://vanguardblog.com/2013/01/10/reits-a-word-of-caution/

I'm sure there are other sources out there as well that I don't remember or didn't come across. Ultimately it boils down to what you are comfortable with in your portfolio.

These go along with the concept of an IPS.
https://about.vanguard.com/what-sets-vanguard-apart/principles-for-investing-success/ICRPRINC_042014_Online.pdf (PDF)
http://news.morningstar.com/articlenet/article.aspx?id=79486&_QSBPA=Y

James

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Re: Putting ~10% of my net worth into REITs... good or bad idea?
« Reply #7 on: April 23, 2015, 10:03:37 AM »
I have about 10% in Vanguard REIT. Not sure the exact percentage, it is 20% of what I have at Vanguard, which is roughly 50% of total investments.

Wolf359

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Re: Putting ~10% of my net worth into REITs... good or bad idea?
« Reply #8 on: April 23, 2015, 10:24:10 AM »
In my research, the reason it is not recommended to exceed 10% in your asset allocation is due to volatility and diversification.  Surprisingly, there are only 204 market traded REITS in the US. 90% of them are equity REITs; 10% are mortgage-only REITs. (Source: REIT.COM)
 
Overweighting on REITs puts a larger part of your asset allocation into just a couple hundred companies.

blizeH

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Re: Putting ~10% of my net worth into REITs... good or bad idea?
« Reply #9 on: April 24, 2015, 02:50:25 AM »
Thank you very much for the information guys :) I'm thinking of maybe investing a bit into REITs, but since I already have the rental property it'll likely be less than 10%.

Mighty-Dollar

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Re: Putting ~10% of my net worth into REITs... good or bad idea?
« Reply #10 on: April 24, 2015, 04:02:20 AM »
Use Ric Edelman's GPS to determine how much to put into REIT's. https://gps.ricedelman.com/

mrpercentage

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Re: Putting ~10% of my net worth into REITs... good or bad idea?
« Reply #11 on: April 24, 2015, 04:38:38 AM »
You have to be careful. Some are dangerous. I have stepped into traps with those trying to skim juicy dividends with mixed restults. A trap is something you don't want to sell because it's going down. Bad voodoo