REIT personal finance USA article

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peteyperson
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REIT personal finance USA article

Post by peteyperson »

Balance portfolio with REITs

Real estate funds may be just what you need if you're discouraged by the low rates on bonds and bank CDs and want to add some diversification and stability to your portfolio.

These are mutual funds that invest in holding companies known as real estate investment trusts, or REITs, which make their money by purchasing and then renting out properties such as apartments, shopping centers, office buildings, hotels and warehouses. They've been on a tear lately (and, in the name of full disclosure, I acknowledge I've been a longtime owner of several such funds).

For the three-year period ending Aug. 31, the average real estate fund has returned 14.9 percent a year, compared with a drop of 6.5 percent for the average stock fund, according to Sheldon Jacobs, editor of the No-Load Fund Investor, a monthly mutual fund newsletter published in Ardsley, N.Y. <snip>


http://www.portlandtribune.com/archview.cgi?id=20548

Petey
Mike
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Post by Mike »

My impression is that you could buy them now if you wanted to take advantage of their short term momentum, but for long term holdings you might get a slightly better price if you waited until they go cyclically out of favor again. Of course, the market doesn't always cooperate with my guess work. :)
peteyperson
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Post by peteyperson »

I agree.

Would you say this directly relates to whether to ETF is trading above NAV at the time? Would that be a useable measurement rather than timing the investment to a mass investment back into equities and doing the opposite to norm?

Petey
Mike wrote: My impression is that you could buy them now if you wanted to take advantage of their short term momentum, but for long term holdings you might get a slightly better price if you waited until they go cyclically out of favor again. Of course, the market doesn't always cooperate with my guess work. :)
Mike
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Post by Mike »

The ETF index funds generally have provisions that keep them trading pretty close to the net asset value of the underlying stocks. I don't follow closed end funds very often, but when they get above NAV, this tends to indicate that their underlying stock sectors are currently popular. When the individual REIT stocks trade significantly above the value of their underlying property values, this usually indicates that REITs are currently popular. They have performed well since I bought them 3 years ago. I am not selling, but I am no longer buying them either.

Short term, their momemtum will likely carry them higher. Longer term, they may sell at better prices than they do now, but this could take years. They will likely go higher before they go lower because of their positive momentum. Short term trends in stock prices tend to continue for a while.
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