Author Topic: Talk to me About REIT?  (Read 4037 times)

Orvell

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Talk to me About REIT?
« on: January 29, 2016, 10:01:59 AM »
Hi guys,
I'm pretty new to investing, but recently set up a Brokerage account through Vanguard. I currently have:
10K - VTSAX
3K - VBLTX

Can someone explain, in stupid-people terms, what REIT means and if it would be a wise decision? I'm thinking I should diversify, but the "how" is a little fuzzy.

Retire-Canada

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Re: Talk to me About REIT?
« Reply #1 on: January 29, 2016, 12:19:49 PM »
Quote
A real estate investment trust (REIT) is a company that owns, and in most cases, operates income-producing real estate. REITs own many types of commercial real estate, ranging from office and apartment buildings to warehouses, hospitals, shopping centers, hotels and even timberlands.

http://www.investopedia.com/terms/r/reit.asp

Stache-O-Lantern

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Re: Talk to me About REIT?
« Reply #2 on: January 29, 2016, 12:21:48 PM »
REIT stands for Real Estate Investment Trust.  It's basically just a company that owns real estate.  Some specialize in certain kinds, like commercial, residential, storage units, etc.  There's some different rules for companies that are organized as REIT's.  They have to pay more of their earnings out as dividends.  So REIT's tend to have a high dividend yield.

The VTSAX you own already has a small % of REIT's in it, so you already have some.  Some people like to have more REIT's in their portfolio, and so might buy a REIT specific index fund, such as VGSLX.  REIT dividend are mostly not "qualified dividends" for tax purposes.

When your portfolio is larger you may want to do that, or overweight certain other assets.  Before you do that though, i would recommend continuing to save, and then learn more about asset allocation and asset diversification.  You have a good portfolio for a beginning investor.  But its a little small for further diversification.  At this point most of your gains are likely to be from saving, not better returns from a better portfolio.

Orvell

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Re: Talk to me About REIT?
« Reply #3 on: January 29, 2016, 01:52:06 PM »
Thanks guys! This is 10000% true. I have an additional 7K I feel comfortable investing this year, and am trying to figure out where best to sink it.
I appreciate the intel that REIT specific is probably too high level for my situation (for now! I have plans to grow that sucker.)

soccerluvof4

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Re: Talk to me About REIT?
« Reply #4 on: January 29, 2016, 02:08:43 PM »
I am one that likes to be slightly overweight REITS and use VGSLX to accomplish that with Vanguard. What others said above answers your question.

robartsd

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Re: Talk to me About REIT?
« Reply #5 on: January 29, 2016, 03:07:46 PM »
I wouldn't look to diversity into specific sectors until I had at least 10k that I want to allocate to the sector so that I can do it in Admiral shares of a Vanguard fund.

Orvell

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Re: Talk to me About REIT?
« Reply #6 on: January 29, 2016, 03:24:01 PM »
I wouldn't look to diversity into specific sectors until I had at least 10k that I want to allocate to the sector so that I can do it in Admiral shares of a Vanguard fund.
*nods
I can see the logic behind this. The only issue is for me that takes some time to build that amount of capitol. And once I make that decision, it will take me some time to build up enough to diversify elsewhere.
I currently save $500-$1,200/month depending on the situation.

PhysicianOnFIRE

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Re: Talk to me About REIT?
« Reply #7 on: January 29, 2016, 03:48:28 PM »
I wouldn't look to diversity into specific sectors until I had at least 10k that I want to allocate to the sector so that I can do it in Admiral shares of a Vanguard fund.

+1

I wouldn't worry about REIT until you are approaching a 6-figure portfolio.  I have 10% of my portfolio in REIT, which is probably more than most.  I have it for diversity, but it correlates fairly closely with stocks.  They took a huge nosedive with the '08 drop, close to 80% I believe, much more the the S&P 500.

Orvell

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Re: Talk to me About REIT?
« Reply #8 on: January 29, 2016, 03:55:56 PM »
Okay, great intel on the fact that this is a future-me problem and not a now-me problem.
Thanks!

GrOW

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Re: Talk to me About REIT?
« Reply #9 on: January 29, 2016, 04:26:29 PM »
Include tax efficiency in your REIT research, whether you plan to invest in them now or later. I believe that many REITs provide unqualified dividends and thus can affect your tax planning if you are tracking to a very specific plan.

MustacheAndaHalf

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Re: Talk to me About REIT?
« Reply #10 on: January 29, 2016, 07:51:55 PM »
REIT is 4% of Vanguard Total Stock Market.  It's a small part of the picture.
http://portfolios.morningstar.com/fund/summary?t=VTI&region=usa&culture=en_US

But you're missing another area of diversification by looking at REIT so soon: international.  Before doubling up on the 4% REIT you already own, consider that you have no investments in half the world outside the US.  Consider adding an international fund next, rather than REIT.

Jon_Snow

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Re: Talk to me About REIT?
« Reply #11 on: January 30, 2016, 04:58:41 PM »
Oh, REITS....what a beeaaaauuutiful source of income...tax free too if you are Canadian and stick 'em in your TFSA (can't remember what the US equivalent account is).

I own about a half dozen of them...last time I looked the were yielding me about 6.5%.

robartsd

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Re: Talk to me About REIT?
« Reply #12 on: February 01, 2016, 04:49:36 PM »
Oh, REITS....what a beeaaaauuutiful source of income...tax free too if you are Canadian and stick 'em in your TFSA (can't remember what the US equivalent account is).

I own about a half dozen of them...last time I looked the were yielding me about 6.5%.
Canada's TFSA and US Roth retirement accounts are similar in that taxes are paid when the money contributed is earned, not when withdraws from the accounts are taken.