REIT's Buy and Hold, Dollar Cost Averaging Now or...?

[greaps]

I am currently allocated 40% Total US Stock Market Index, 40% Total International Stock Market Index, and 20% US Bond Index valuing about 250,000$ split between Vanguard IRA and Roth IRA, and a Nation Wide 457 plan. I purchase by dollar cost averaging, and perform annual assets reallocations I am 28, with a payed off home and am 17 years to retirement with a state pension.

I am interested in adding a third asset to my allocation; REIT's. I want to add REIT's to my ROTH IRA, being it won't be 31 years till I begin to make withdrawals, should I worry about all the negative REIT sentiment surrounding the risk of increased interest rates in the near term? As I understand it, many are predicting if interest rates rise, ( and rise they must many conclude ) REIT's along with Bonds will be hammered. Being I am a long term investor it seems that if rates rise and I continue to buy REIT's and Bonds, I would be accumulating these assets at a discount.  Is that how this works?

 

[daverobev]

"REITs", no apostrophe.

It gives you exposure to real estate, or mortgages (a different kind of REIT does this).

A modest allocation is not a bad thing, but not necessary; the underlying companies may well already be part of your index trackers. Also, you said you have a paid off house. How much exposure to real estate do you want?

5% or max 10% is fine, but by no means necessary. The whole thing is about owning non-correlated assets. If you think REITs will plunge when bonds do, why own both?

But yes, to your question - if you're going to add to your holdings for 20 years or more, it is certainly 'how it works' and not a bad thing.