Reits Investments

**Broken Arrow** · 10-14-2010, 09:06 AM

REITs are one viable option for diversifying one's core portfolio. Specifically, they are a way to diversify your fixed income position beyond just bonds. This is especially so since we are still in a depressed housing market and NAVs are relatively cheap.

That said, I don't have any particular recommendations in mind. That would depend on who you are investing with and what options are available to you. Again though, I would just keep in mind that they are a part of fixed income asset class as you set about your asset allocation.

**fruitbowlk** · 10-14-2010, 10:04 AM

Originally posted by Broken Arrow View Post

REITs are one viable option for diversifying one's core portfolio. Specifically, they are a way to diversify your fixed income position beyond just bonds. This is especially so since we are still in a depressed housing market and NAVs are relatively cheap.

That said, I don't have any particular recommendations in mind. That would depend on who you are investing with and what options are available to you. Again though, I would just keep in mind that they are a part of fixed income asset class as you set about your asset allocation.

Thanks I didn't realize they were a part of fix income.

**Broken Arrow** · 10-14-2010, 10:14 AM

Since I'm here, another tidbit to be mindful of is redemption fees. REITs seem to be notorious for them (i.e. VGSIX) and could be as much as 2% (VGSIX is 1%). If you are planning to sell within a year, I recommend ETF variants. If it's more than a year, then mutual funds will do.

**jpg7n16** · 10-14-2010, 11:20 AM

REITs are essentially just mutual funds that only invest in real estate.

Real estate isn't a huge money-maker, and the fund structure takes some fees to run it for you. But if you don't have the money to go out and buy the real estate itself, it is the best way to diversify in that asset class (like BA pointed out above).

So if you have enough to buy a whole hospital or two, then lease it - you'd make more, but have more risk than if you found a Hospital/Healthcare REIT.

They do pay out dividends (like monthly rent checks) but I just couldn't call them fixed income. Some REITs only invest in mortgages (which work like bonds) while others actually buy and/or manage the properties themselves. That varies by fund.

**disneysteve** · 10-14-2010, 11:20 AM

We own this: Real Estate Investment Trusts | REIT

**elessar78** · 10-15-2010, 05:01 AM

Broken Arrow, so the REIT comes out of the bonds side of asset allocation?

If I'm 80/20 stocks-bonds... the REIT should be on the bonds side of my portfolio?

**Broken Arrow** · 10-15-2010, 05:30 AM

Yes, that's how they are usually treated in asset allocations. Like bond funds, REITs are relatively stable and generate interests.

They're kind of talked about recently as a way to ward off the interest rate bogeyman that is lurking within bond funds.

The numbers I've seen elsewhere suggests anywhere from 5% to 10% allocation for diversification purposes. As an example for a 80/20 portfolio, you would then have 80% stocks, 10% bond fund, and 10% REIT. I wouldn't have it cut into your stock allocation unless your intention is to lower your overall volatility.

Reits Investments