Author Topic: REITs vs index funds, do you invest in REITs why/why not?  (Read 1058 times)

vinnybagodonuts

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REITs vs index funds, do you invest in REITs why/why not?
« on: February 12, 2020, 08:38:02 AM »
I'm debating whether to sell off my REITs and add the proceeds to my index fund positions. Do you like to buy any REITs?

I like the idea of dividend income, but at the same time what is the point if I'll make a better overall return with index funds. A small hedge against recession and more consistency? I'm not sure anymore.

Let me know how you allocate your investments!

EvenSteven

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Re: REITs vs index funds, do you invest in REITs why/why not?
« Reply #1 on: February 12, 2020, 08:58:38 AM »
One thing to consider is that something like VTSAX (or VTI) invests in REITS (somewhere around 4%).

You should try to shake your fondness for dividends and become dividend agnostic. Total return is what matters.

I also wouldn't think of REITS as being a hedge against recession. We don't know exactly what the next recession will look like, but REITS aren't likely to fare better in a recession than the market.

All this being said, there isn't anything particularly wrong with REITS, but you should have a solid reason for tilting towards them if you are going to hold them.

AM43

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Re: REITs vs index funds, do you invest in REITs why/why not?
« Reply #2 on: February 12, 2020, 09:46:01 AM »
I hold and buy REITS , but its only about 10% of my overall portfolio.
Since its such a small part of my overall portfolio I don't even think about it and just look at it as a good way to diversify.

Tyler

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Re: REITs vs index funds, do you invest in REITs why/why not?
« Reply #3 on: February 12, 2020, 10:35:21 AM »
I like the idea of dividend income, but at the same time what is the point if I'll make a better overall return with index funds.

If you like REITs and like index funds, there are several excellent index funds that track REITs.  In fact, VNQ is one of the largest ETFs in the world.

« Last Edit: February 12, 2020, 10:39:40 AM by Tyler »

Buffaloski Boris

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Re: REITs vs index funds, do you invest in REITs why/why not?
« Reply #4 on: February 12, 2020, 11:44:57 AM »
You can own REIT specific funds. I think they're good for diversification. 

As for where to allocate assets, it's a tad ironic but Tyler of Portfolicharts fame is on this thread.  He has the most awesome tool for looking at historical returns for various portfolios. Well worth looking at and taking for a test drive. 

SuperSecretName

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Re: REITs vs index funds, do you invest in REITs why/why not?
« Reply #5 on: February 12, 2020, 12:15:01 PM »
I have 10% in VNQ.  It tends to zig when the market zags.  Make sure it's an a tax-advantaged account.

GoCubsGo

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Re: REITs vs index funds, do you invest in REITs why/why not?
« Reply #6 on: February 12, 2020, 01:37:27 PM »
Did VNQ hold up well during the great recession?  I held REIT funds and recall they were pretty correlated with my equity funds and I wasn't that impressed.  I may be remembering wrong and will probably do some research as I haven't owned REIT's in years and don't have a real reason why. 

ChpBstrd

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Re: REITs vs index funds, do you invest in REITs why/why not?
« Reply #7 on: February 21, 2020, 09:46:54 PM »
The problem with REITs is in all their sectors:

Residential: If you want a 2% yield, just buy a bond fund.
Office: A very cyclical bet, and just as the internet is making WFH possible for more employees.
Industrial: Cyclical.
Retail: Most retail space is being made obsolete by online shopping, and it is very overbuilt. Malls need to be torn down, not invested in.
Healthcare: Looks like Trump will win a 2nd term, which means lower Medicare/Medicaid reimbursement rates for hospitals and nursing homes. Contrary to popular opinion, they can and do go bust all the time. I might bite if a Democrat somehow won, because at least things wouldn't get too much worse for healthcare operators.
Mortgage: Good fucking god, did we learn nothing in 2008?

Meanwhile, MLPs are a bet on the future of fossil fuels, which are experiencing both declining demand and overcapacity.