Author Topic: What do you guys think of these high dividend REITs?  (Read 13851 times)

watermen

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What do you guys think of these high dividend REITs?
« on: February 15, 2013, 03:12:38 AM »
I spent a lot of time recently doing research on Lending Club to see where is the best place to growth money.

Now I am looking at these high dividend REITs, a few of them have very high return, even higher than Lending Club, sound too good to be true.

NYSE:TWO, Two Harbors Investment -- the highest of all, 17.54%
NYSE:NYMT, New York Mortgage Trust -- the second highest, 15.56%
NYSE:NLY, Annaly Capital Management -- 11.87% only, but their company website claims to be the biggest in the US.

What do you guys think of all these? or Are there any better REITs to invest?
« Last Edit: February 15, 2013, 05:51:55 AM by watermen »

Honest Abe

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Re: What do you guys think of these high dividend REITs?
« Reply #1 on: February 15, 2013, 03:32:28 AM »
I bought NLY at 16... Since then its gone down but the dividend still pays a lot (less than it did when I bought it, hence the drop in price.) If its a long term hold then REITs are good, given sound management and a reasonable entry point. Don't chase yield here, do your homework.

arebelspy

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Re: What do you guys think of these high dividend REITs?
« Reply #2 on: February 15, 2013, 06:05:23 AM »
Don't chase yield

This this this.  Or you're gonna get * at some point.

No comments on those specific REITs, just a reminder to stick to your asset allocation - likely don't go about 5-10% of your investing portfolio on REITs as an asset class.

If you research these and decide one or a few is worth holding as a small percentage of your portfolio, go for it.  If you ask random people on the Internet while alt-tabbing to Excel and getting happy when you project how quick you can FIRE with 10%+ returns, please back slowly away from the brokerage website.
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watermen

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Re: What do you guys think of these high dividend REITs?
« Reply #3 on: February 15, 2013, 06:36:22 AM »
What do you guys recommend for portfolio?

I am thinking of

30% REIT (such as NLY or NYMT, their prices seem very stable over the years, so I no need to look at my iphone and chase their prices, which is what I am looking for)
20% Lending Club (in experiment process, if yield is consistently more than 12% over the next 3 years, I may invest more)
30% Stocks (I feel like getting rid of stocks entirely and go into REITs and collect dividend and compound it, what do you guys think?)
10% Cash
10% Physical gold and silver

What do you guys think of this distribution?

jpo

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Re: What do you guys think of these high dividend REITs?
« Reply #4 on: February 15, 2013, 06:43:34 AM »
I held AGNC for a while and had no problems but felt like I was sitting on a ticking time bomb. Now I have money in VNQ instead.

watermen

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Re: What do you guys think of these high dividend REITs?
« Reply #5 on: February 15, 2013, 06:52:13 AM »
I held AGNC for a while and had no problems but felt like I was sitting on a ticking time bomb. Now I have money in VNQ instead.

Why do you feel that you were sitting on a time bomb with AGNC? Just wondering? I did a profile check, AGNC seems to be giving 15% interest and its price is steadily increasing...isn't it good? unless you bought it at a very high price?

On the other hand, VNQ dividend is only 3.39%.

I am still learning all these,  would like to know what is your reason?

jpo

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Re: What do you guys think of these high dividend REITs?
« Reply #6 on: February 15, 2013, 07:02:38 AM »
I held AGNC for a while and had no problems but felt like I was sitting on a ticking time bomb. Now I have money in VNQ instead.

Why do you feel that you were sitting on a time bomb with AGNC? Just wondering? I did a profile check, AGNC seems to be giving 15% interest and its price is steadily increasing...isn't it good? unless you bought it at a very high price?

On the other hand, VNQ dividend is only 3.39%.

I am still learning all these,  would like to know what is your reason?
AGNC invests in government-backed mortgage securities and are relying on interest rates staying low. I don't think it will be a great investment when interest rates start to rise, and I'm sure as that day comes nearer it will be priced into the stock.

Also I was in a "chasing high dividend" investing phase. Learned my lesson with GNI a while back on that one.

watermen

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Re: What do you guys think of these high dividend REITs?
« Reply #7 on: February 15, 2013, 07:04:54 AM »
I held AGNC for a while and had no problems but felt like I was sitting on a ticking time bomb. Now I have money in VNQ instead.

Why do you feel that you were sitting on a time bomb with AGNC? Just wondering? I did a profile check, AGNC seems to be giving 15% interest and its price is steadily increasing...isn't it good? unless you bought it at a very high price?

On the other hand, VNQ dividend is only 3.39%.

I am still learning all these,  would like to know what is your reason?
AGNC invests in government-backed mortgage securities and are relying on interest rates staying low. I don't think it will be a great investment when interest rates start to rise, and I'm sure as that day comes nearer it will be priced into the stock.

Also I was in a "chasing high dividend" investing phase. Learned my lesson with GNI a while back on that one.

What happened to GNI? Is GNI a REIT? Please educate me, thanks.

NumberCruncher

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Re: What do you guys think of these high dividend REITs?
« Reply #8 on: February 15, 2013, 07:06:20 AM »
What do you guys recommend for portfolio?

I am thinking of

30% REIT (such as NLY or NYMT, their prices seem very stable over the years, so I no need to look at my iphone and chase their prices, which is what I am looking for)
20% Lending Club (in experiment process, if yield is consistently more than 12% over the next 3 years, I may invest more)
30% Stocks (I feel like getting rid of stocks entirely and go into REITs and collect dividend and compound it, what do you guys think?)
10% Cash
10% Physical gold and silver

What do you guys think of this distribution?

Risky to have a really high allocation for REITs...read up on Boggleheads for more: http://www.bogleheads.org/wiki/REIT#Risks

arebelspy gave the common wisdom opinion you're going to hear from a lot of people here and on Boggleheads about REITs- 5-10% is probably fine, more is risky, especially if you expect interest rates to rise.

I'm curious why you would want 10% in cash, especially when the stash gets larger? You want your employees to work for you!

jpo

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Re: What do you guys think of these high dividend REITs?
« Reply #9 on: February 15, 2013, 07:12:35 AM »
What happened to GNI? Is GNI a REIT? Please educate me, thanks.
GNI is not a REIT. I was chasing the high dividend at the time. When I bought it the dividend was some 13% or so. Unfortunately I didn't research enough about the company and the stock took quite a price dive shortly after I bought it and never recovered.

arebelspy

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Re: What do you guys think of these high dividend REITs?
« Reply #10 on: February 15, 2013, 07:12:47 AM »
watermen, you really need to LEARN about investing.  There's a ton of good books, but so far your posts have been all over the place - lending club, investing in foreign banks, gold, individual stocks (AAPL), REITs, etc.  All of which have been very basic questions about the investment in question, while at the same time talking about jumping in with most of your money into that single investment.

This is on top of questions that show you don't understand basic things like taxes relating to a Roth IRA. 

You literally posted 4 days ago asking what a REIT is: https://forum.mrmoneymustache.com/ask-a-mustachian/what-is-reit-all-about-and-where-to-buy/msg56118/#msg56118

Now you're ready to jump in with the majority of your portfolio into them?

You're really a danger right now to your stache.  You're basically scheming on how to lose a bunch of money fast.

Investing isn't a sprint, it's a marathon.

I want to quote Nord's advice to you from a few days ago:
I think you need to decide what you're investing for (retirement, college, possessions) and figure out your asset allocation.
http://www.bogleheads.org/wiki/Investment_Policy_Statement

Then you can decide what assets/funds you want to buy, and put your money into them at whatever pace feels best to you-- all at once or over a period of months.

Otherwise you're just wandering around the market without a shopping list.

Start there, and go read The Intelligent Asset Allocator and A Random Walk Down Wall Street (both available at your local library).

But please, please don't just jump into some random investment because it offers a high return.
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Nords

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Re: What do you guys think of these high dividend REITs?
« Reply #11 on: February 15, 2013, 08:27:00 AM »
What do you guys recommend for portfolio?
What do you guys think of this distribution?
Arebelspy is trying to point out to you that you're making the classic new investor mistake.  We've seen hundreds of guys like you make exactly this mistake over the last decade of discussion boards like this one.  You're wandering through the candy store putting shiny objects in your shopping basket, and then you're going to wonder why your portfolio doesn't perform the way you expect it to.  When the next recession hits and those assets get their share prices hammered (whether or not their dividend yield holds up) then you're going to get discouraged, lose whatever faith you might have had in Internet advice from random strangers, and sell out at the bottom.

Or at least that's what the other hundreds of guys like you have done.

I still think you need to demonstrate that you've done some reading on asset allocation.

You're getting plenty of advice here.  Maybe it's time to stop shopping for more of it and to use a little of what you've been offered.
« Last Edit: February 15, 2013, 08:31:27 AM by Nords »

KingCoin

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Re: What do you guys think of these high dividend REITs?
« Reply #12 on: February 15, 2013, 09:27:00 AM »
seekingalpha.com is often a good place to read free material on specific REITs or stocks. A lot of the issues they discuss are going to be over your head, but it might be a good way to start getting familiar with the relevant variables.

That being said, I'd keep in mind:
1) REITs are often extremely levered. Even VNQ, which is much less risky than some of the individual REITs you mentioned, fell over 70% during the crisis. So if you're looking for non-risky alternative to stocks, you may be barking up the wrong tree.
2) The most sophisticated REIT investors in the world are looking at the same REITs you are. If the market price for a given REIT is a 15% yield, you can rest assured that it's very high risk. You haven't stumbled on some hidden gem that everyone else is missing.
3) If you don't have the knowledge, time, or skill set to analyze individual securities (and you don't ), indexing is your best bet.

I think your allocation is a good starting point but 30% in REITs strikes me as quite high. It might be worth starting another post, stating your specific investment circumstances and goals (include financial situation, goals, risk tolerance, investment horizon, etc.), and soliciting input on the back of that information. It's impossible to give good advice on a specific asset allocation without information about the investor.

Also, the theme of many of your posts has been trying to find double digit type returns with low risk. You can stop your search, because in the liquid capital markets, these opportunities simply don't exist.  Anything with a double digit yield is likely to be very high risk. I can report that countless hedge funds are scratching their head right now trying to figure out how they're going to make money this year. 

You may find a better risk/return profile in the illiquid market such as individual real estate transactions, illiquid credit notes, and even lending club, but these usually require a significant amount of time and/or expertise.

COguy

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Re: What do you guys think of these high dividend REITs?
« Reply #13 on: February 15, 2013, 09:40:34 AM »
Check out Jim Collins stock series while you are at it, too, if you have not yet.  I think it is a great place for a beginner to learn (or a knowledgeable investor for that matter).  If nothing else he will enlighten you to why Arebelspy and Nords are saying what they are saying.

http://jlcollinsnh.wordpress.com/2012/04/15/stocks-part-1-theres-a-major-market-crash-coming-and-dr-lo-cant-save-you/

crk

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Re: What do you guys think of these high dividend REITs?
« Reply #14 on: February 15, 2013, 11:02:48 AM »
The most important thing here for you to understand is the difference between mortgage REITs and property REITs.  The risk profile is almost opposite: Mortgage REITs typically invest in long-term debt using a large portion of funds borrowed in the shorter term. Because the spread between long-term and short-term rates is currently high and they are able to leverage up so much, they are currently very profitable, but are incredibly sensitive to rising rates. So, as long as short term rates stay low they are going to stay profitable, but given interest rates have been historically low for a historically long period of time, it isn't a matter of if rates are going to rise and mortgage REITs are going to rise, but when. In other words, I think they are a ticking time bomb. I mean, why else would their yields be so attractive?

Property REITs on the other hand invest in real assets. As such, they can provide some element of protection against inflation. One I think is particularly interesting right now is SBY, probably because I can understand their value proposition: buy foreclosed homes, fix them up, and rent them at highly favorable rent/capital cost multiples. Yield for these isn't as good but, although they are still risky, you don't have the same degree of risk of losing your shirt.

tooqk4u22

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Re: What do you guys think of these high dividend REITs?
« Reply #15 on: February 15, 2013, 11:08:17 AM »
The most important thing said so far is you need to learn about investing.

Beside that the REITS you cited are mortgage REITs - that is a whole different animal that has both interest rate risk and leverage risk - the yield means nothing.

KingCoin

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Re: What do you guys think of these high dividend REITs?
« Reply #16 on: February 15, 2013, 11:26:26 AM »
One I think is particularly interesting right now is SBY, probably because I can understand their value proposition: buy foreclosed homes, fix them up, and rent them at highly favorable rent/capital cost multiples.

I like single family rentals as well, but running through the numbers on SBY, it's hard to get excited. It's still in its formative stages, and there are a lot of hands in the cookie jar.
http://static.cdn-seekingalpha.com/article/1112791-prospects-for-new-reit-silver-bay-realty-trust
http://static.cdn-seekingalpha.com/article/1088771-examining-silver-bay-realty-trust-corp-is-two-harbors-spin-off-a-buy

lac

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Re: What do you guys think of these high dividend REITs?
« Reply #17 on: February 15, 2013, 01:37:45 PM »
I have owned TWO a couple times over the past year and really enjoyed their dividends.  I also like to own these monthly dividend stocks as well:  ARR, OpE (preferred stock)


Disclosure: I am currently long TWO, ARR and OpE

crk

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Re: What do you guys think of these high dividend REITs?
« Reply #18 on: February 15, 2013, 02:42:26 PM »
I like single family rentals as well, but running through the numbers on SBY, it's hard to get excited. It's still in its formative stages, and there are a lot of hands in the cookie jar.

The management structure does get me a little nervous because their incentives aren't perfectly aligned, but at the current price it is the equivalent of buying the houses they own at only a small premium to their total capital costs and the price/rent ratios are quite favorable. I don't think it's a home run by any means but I think if you believe in the price/rent story it's pretty hard to find another way to put it into practice and get the benefits of scale economies and geographic diversification, and the downside does seem pretty limited.


marty998

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Re: What do you guys think of these high dividend REITs?
« Reply #19 on: February 15, 2013, 03:42:40 PM »
I was once told "the higher the yield, the closer the price is to zero"

The big trap in OZ was highly leveraged REITs and Infrastructure stocks paying distributions by raising debt instead of using operating cash flow.

A good case study was Rivercity Motorway. The company was building a toll road tunnel and paid so many tax deferred (capital return) distributions it was insolvent before the road was finished and died months later when traffic actuals with heavily discounted tolls were 20% of forecast.

The price didn't quite get to zero (0.003 I think was the last price). But it still found cash to pay a 1c distribution at the end, a yield of 333%?

zoltani

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Re: What do you guys think of these high dividend REITs?
« Reply #20 on: February 15, 2013, 03:51:53 PM »
I've got some money in RSO and SNH, but holding them does make me slightly nervous (even at less than 1% of total portfolio), RSO more than SNH.  I got in at a good price on RSO and it has treated me well so far, but that doesn't mean it won't bite me in the ass at some point.  Interesting thing is that they both continued paying dividends right through the crisis. 

watermen

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Re: What do you guys think of these high dividend REITs?
« Reply #21 on: February 15, 2013, 06:28:26 PM »
Thanks for all the advice. I am looking into every option. Like I said I am really a beginner and trying to learn, which is I am asking a lot of stupid questions. I apologize if my questions are really stupid and annoy some people here.

My goal is not really a retirement plan, because I don't think I want to retire. I have no debt of any sort, I have a very fulfilling job and enjoy what I am doing and would very much love to work as long as possible, unless physical condition restrict me from doing so. I cannot imagine 30-40 years from now on retiring and sit at home do nothing. One of my mentors, he is 80 years old and he is still working, and I want to be like him.

My goal is to grow money, I simply just enjoy seeing money growing just for the fun of it. If there is a goal, my goal is to just buy a house that I like without a loan. (of course some people are going to call me stupid for not getting a loan, my reason is quite simple, because I don't know where I really want to settle down, paying rent is a lot more hassle free for the time being, not to mention my rent is not high at all.)

Therefore, I am looking into anything that have double digit return, like Lending Club or high dividend REITs. Yeah, I know there is risk, but I am willing to take some risk when I am still young. If I buy high dividend REITs, I am looking for long, not short, which why I am looking at REITs that have relatively stable prices throughout the years, such as NLY or NYMT (for the last 5-6 years), I am not looking to benefit from the price changes.

In short, I would love to see my current saving double up in 5 years. Aside from buying the right share and hope that the company grow, which I think is just like trying to strike a lottery. The only way that I know of that can double up my money right now is compound interest of at least 12%. There are just not many things I know of that give 12% interest. Lending Club is one of them and their model seems relatively stable, of course, time yet to prove it. REIT is also another one that looks quite promising.

« Last Edit: February 15, 2013, 06:31:32 PM by watermen »

arebelspy

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Re: What do you guys think of these high dividend REITs?
« Reply #22 on: February 15, 2013, 07:48:06 PM »
I don't think any of us are annoyed at the questions, just trying to caution you.

And I think there are very few here who want to stop working.  We're mostly striving for financial independence here.  The ones who really hate their jobs are pressing harder.  If you're young and don't hate your job, why are you so concerned about doubling your stache quick?  One step at a time.

You have to understand: high returns is correlated with high risk.

It just seems like you don't want to hear the advice of "start learning" and just want advice of "invest in this."

So okay, here you go: buy VTSAX.  Keep buying, regardless of whatever the market does.  Don't buy individual stocks. Don't buy bonds. Don't but REITs. Don't use lending club. Don't buy gold. Just total market index fund.  Done.

You'll end up rich, with no work.  It'll just take time, and compounding returns of your continual investments.

Best of luck.

(Also, if it's not clear, please ignore my sarcasm and don't follow this blindly. Go research and find the right AA for you. That's an AA I'd advocate for certain aggressive investors with a long timeframe.. YMMV.)
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KingCoin

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Re: What do you guys think of these high dividend REITs?
« Reply #23 on: February 16, 2013, 03:17:59 PM »
The only way that I know of that can double up my money right now is compound interest of at least 12%.

Here are a couple other ways:
Roullette: Bet it all on black. You can double your money in about 20 seconds. This strategy is highly risky.
Treasury Bonds: Bet it all on the 20yr bond. You can double your money in about 20 years. This strategy is extremely low risk.

Sorry if that's snarky, but I hope it illustrates a point. There's nothing magic about 3.3% returns or 12% returns or 100% returns. They'll all double you're money, just with increasing risk of going bust the higher up the return spectrum you go.

I'm going to play armchair psychologist here. My guess is that you got burned on AAPL stock from a movement in the price. Now you're soured on anything that primarily makes money through price appreciation. You want the comparative safety of something that cranks out a reliable 12% in distributions.

What everyone is trying to tell you is that the reliable 12% is illusory. Something might appear to have a stable price and pay 12%, but when things go bad you'll be one of the first ones to lose it fucking all.  Why? Because you bought the riskiest shit you could find that "promised" you 12%.

Your paragons of price stability NYMT and NLY? NYMT peaked at 110. Now it's 7. NLY has had multiple 50% price drops in the last decade. You can bet it's going to happen again. It's going to draw down just like your AAPL stock.

You have a long investment ramp. If anything you should be embracing things with price appreciation potential like stocks. Getting a broad based education will get you comfortable with a long term approach, allow you to ride out dips, and ultimately make you rich. You clearly have an admirable enthusiasm for investing. You just have to channel it in a productive way, rather than looking for a get rich quick scheme. How far are you in Random Walk Down Wall Street?

http://www.bogleheads.org/wiki/Investment_Policy_Statement
« Last Edit: February 16, 2013, 03:20:10 PM by KingCoin »

squashroll

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Re: What do you guys think of these high dividend REITs?
« Reply #24 on: February 20, 2013, 04:49:11 AM »
Any of you smart guys have an opinion on VGSLX?

tooqk4u22

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Re: What do you guys think of these high dividend REITs?
« Reply #25 on: February 20, 2013, 08:05:58 AM »
Any of you smart guys have an opinion on VGSLX?

It is a good way to bring some REIT/Real Estate exposure into your portfolio mix and is diversified amont all asset classes of REITs.

Some issues I have with it is that REITS look a little rich right now when viewed with the economic picture (low growth) and the top 10 account for 45% of the holdings, and Simon is almost 11% and health care reits account for a large chunk as well.

This is not bad per se as the top holdings are the strongest reits with best assets and trends....question is can it continue or do the more out of favor/smaller reits have more room to grow.

Not sure...but do have some money in this fund FWIW.

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Re: What do you guys think of these high dividend REITs?
« Reply #26 on: February 20, 2013, 05:41:04 PM »
Any of you smart guys have an opinion on VGSLX?

Not that I'm smart but I have my 5% REIT allocation in VGSLX.

PS: MMM wrote an article about REITs: http://www.mrmoneymustache.com/2011/08/15/become-a-lazy-landlord-with-reits/

Will

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Re: What do you guys think of these high dividend REITs?
« Reply #27 on: February 20, 2013, 08:38:14 PM »
The only way that I know of that can double up my money right now is compound interest of at least 12%.

Here are a couple other ways:
Roullette: Bet it all on black. You can double your money in about 20 seconds. This strategy is highly risky.


I was leaning more towards red.  Any opinions on this?  Why would you pick black over red?   ;)

Mike

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Re: What do you guys think of these high dividend REITs?
« Reply #28 on: February 21, 2013, 05:02:07 AM »
Well, if you want to double your savings in five years, your best bet is to lower your spending as much as you can.  That will take the pressure off trying to chase unrealistically high returns on investment.  Also, if the goal is to buy a house in five years, you'd be insane to go the high risk route.  You're just as likely to lose half your investment as you are to double it (hence the roulette-themed posts).

jrhampt

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Re: What do you guys think of these high dividend REITs?
« Reply #29 on: February 21, 2013, 09:29:12 AM »
I have slightly less than 10% of my portfolio in VGSLX.

yolfer

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Re: What do you guys think of these high dividend REITs?
« Reply #30 on: February 21, 2013, 03:41:48 PM »
I was leaning more towards red.  Any opinions on this?  Why would you pick black over red?   ;)

Because Wesley Snipes is my investment advisor: http://www.youtube.com/watch?v=FTDeOPFr9e4

Will

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Re: What do you guys think of these high dividend REITs?
« Reply #31 on: February 21, 2013, 10:08:05 PM »
I was leaning more towards red.  Any opinions on this?  Why would you pick black over red?   ;)

Because Wesley Snipes is my investment advisor: http://www.youtube.com/watch?v=FTDeOPFr9e4

Nice!

Hopefully he isn't your tax advisor!