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REIT investing

I've been debating whether to invest more into Real Estate. I have a foot-hold in TRREX (trow price) and TAREX (third ave, international) for many years; I bailed during the "great recession" and never went back in any meaningful way.

I'm looking for more "diversification" and "non-correlation", if you will, to go with my bond allocations. I know very little about "alt" funds and other such non-correlated vehicles.

I also understand REITs are sensitive to interest rates and supposedly rates will be rising sometime (soon?), but when and how fast; I certainly do not have a clue.

This investment will be in a TAXABLE brokerage account, so (relative) tax-efficiency is important. TRREX is not bad compared to others in the category.

I came across Davis RE (RPFRX.LW at FIDO) it has a very low tax-cost ratio and does not look too bad. If anyone has any suggestions or opinions on other worthwhile "relatively" tax-efficient REIT funds, please let me know!

The bottom-line question is, after a good run since the "great recession", is this a bad time to increase my Real Estate allocation (5%-7% of portfolio)?

Any thoughts are greatly appreciated!!



fyi, Also, posted on M*.


  • On taxes, the unique "feature" of REITs is that almost all dividends are taxable as ordinary income (whichever bracket you are in). In contrast, most other stocks pay "qualified dividends" which are taxed at much lower rates (0% or 15% for most folks). So it is very possible that your REIT fund will have a higher tax cost than a stock dividend fund with two or three times the yield.

    Your other questions are much more complicated, so I'm just taking the easy one here and leaving the rest to smarter people to answer.
  • claimui, thank you for your input, great point!
  • edited July 2016
    My choice for a reit income fund and one that I own, is FRINX, Fidelity Advisor Real Estate Income. It is a hybrid fund that contains a mix of stocks (mostly small & mid caps), bonds, preferreds and possibly some convertibles. There are a good number of share classes available with one offering (FRIFX) being in no load form. For those seeking income it sports a yield in the low 4% range with a duration reading of about 3% according to Morningstar.

    And, like mcmarasco, I have been thinking of raising my allocation to reits from the current six percent range by at least another percent thinking as interest rates rise this fund should be able to reasonably weather rate increases although I am sure it will be effected as most income generating investments might be when interest rates rise, some more than others.
  • edited July 2016
    I'm in TRGRX, which is TRP GLOBAL Real Estate. Comparing the domestic TRP fund, I see that the USA version is doing better... I'm not going to bail, just on this one, single observation, and I'm happy in TRGRX. I wonder if what is in TRREX is represented in my TRGRX? Anyway, I'd say add in increments, if you want to... Dollar-cost-averaging....I'm already 12.9% in RE, without even trying--- NOT all in TRGRX, which is just 6.11% of my portfolio. Interest rates may rise in the USA, but only a token blip upwards. Elsewhere, there is easing, accommodation, and more easing. And let's not forget the prospect of "helicopter money" falling from the sky. I think these policies are ruinous, but you can't fight city hall. As for individual stocks, I'm waiting for LXP to pull-back before starting a position there.
  • FRIFX and FREAX for me, with a little VNQI
  • If you are looking for diversification, I would not use a fund that owns REITs and stocks of companies that have a lot of real estate. An example of this is Baron Real Estate. It is much more tied to the stock markets than just plain REITs. We have used Cohen & Steers for a very long time. CSRSX has been around since 1991 and has had management changes over the years but has been very consistent. Marty Cohen and Robert Steers retired in 2013. Vanguard VGSLX has minimal expenses and is an index fund. Also take a look at ICF which is the ETF version of Cohen & Steers. While international real estate may have some merits, it add another layer of volatility and risk that may not be worth it. Any of the above give you a quality, alternative investment. One thing to keep in mind, REITS are less subject to interest rate risk than you might think, since they can pass the added expense on through their leases to their renters. This is especially true in a very slow, careful increase in rates as we are likely to have.
  • I appreciate that thoughtful tip, @BobC.
  • This is especially true in a very slow, careful increase in rates as we are likely to have. I hope you are right as bank loan funds may be the place to be. And would love to see a corresponding rise in CD yields. Albeit I have been hearing this rising rate scenario since the beginning of 2014.
  • I recently took a position in GRMRX, not for its income, although it does distribute quarterly, but for capital appreciation. This global RE fund has a fine three-year record and I really liked their write-up on momentum investing on their site. The RE fund has low turnover despite the suggestion in its name. Very responsive sales team who quickly signaled Schwab that I was OK. I think the Gerstein-Fisher funds deserve an MFO profile.
  • Nuts: that's GFMRX.
  • @BenWP- glad to see someone else doing stuff like that too. Makes me feel sort of more normal. Just in case you weren't aware, you can go back into your post and make corrections or additions... just click on the little "gear" in the upper right-hand corner of your post, select "edit", and there you go. It's just amazing what we don't see in a quick text-check until we actually post the thing, and then wonder why we didn't notice "that" before.
  • edited July 2016
    Just thought I'd post this link from Morningstar. Probably a damn pay-wall. Let me know, and I'll solve THAT little capitalist plot.;)
  • @BenWP: What is Mlt-Ftr? (GFMRX.)
    Multi-feature? Ork?
  • edited July 2016
    Crash said:

    Just thought I'd post this link from Morningstar. Probably a damn pay-wall. Let me know, and I'll solve THAT little capitalist plot.;)

    That's an analyst report in the form of a regular article. Seems unusual, & from the preface in italics, clearly a marketing attempt for premium membership. The ranks must be thinning, what with all the site problems over there.
  • @Crash: It's "multi-factor," as explained by the fund company here:

    I guess I should have provided more information earlier.
  • edited July 2016
    Not a problem.:) Thank you. I'm not one for momentum investing. Seems I recall that re: GFMRX, further up the thread, yes? These days, if the catfish are biting, I'm happy. But it's nifty to see a specific fund that's new to me, like this one, which comes so highly recommended. Not a lot of history, but its performance is smashing the lights out! FISHING BLUES. Taj Mahal. Enjoy.
  • @MFO Members Eariler this month I took a position in CSCIX with the belief that the sector will outperform the S&P 500 for the remainder of 2016. According to conventional wisdom, rising interest rates are bad for REITs. The theory is that investors hold REITS because of their high dividend income, and REIT dividends become less attractive as bond yields rise. However, historical evidence hasn’t always supported this theory. Forbes examined what happened the last time the Fed raised rates and found that, contrary to expectations, REIT stocks outperformed the overall market. During the two-year period when rates were rising, REITs returned over 60 percent – far above the S&P 500’s return of 20 percent. The reason for the exceptional REIT performance was that interest rates rose along with a strengthening economy. As demand for rental units grew, so did rents and property values.
  • I'm a KISS investor now at age 82. I have schwab SCHH a clone to VNQ.
  • @Ted- Schwab now shows CSCIX to be available for "redemptions only". I'm seriously considering SCHH in this area, as we have an account there.
  • edited July 2016
    I don't know much about this topic (but that's never stopped me from chiming in).
    What I think I know:

    1. REIT funds been on a roll for several years. When I was looking for a few "Hail Mary" investments at Oppenheimer during a rough patch in September 2015, I dribbled a bit (equal amounts) into 3 new funds: Real Estate (OREAX), gold and EM bonds. All were beaten up, but OREAX not as much as the other two. To my surprise OREAX rebounded very nicely and has held up well since than.

    2. Over the past few months the fund has been nicely non-correlated with equities, sometimes moving in the opposite direction. However, I do not think this is always the case. I recall long periods in the past where they were not so inversely correlated but quite closely correlated.

    3. These funds tend to be very concentrated. TRRIX (mentioned in the OP) has a 50% concentration in its top 10 holdings. I've found the one I own, OREAX, to be similarily concentrated.

    Hope this helps. FWIW
  • @Old_Joe: The only reason I bought CSCIX is it's on the Morgan Stanley Platform, I going to keep at least one year to get away from the deferred back load, and am willing to pay a high ER.
  • @Ted- Thanks for the info... appreciated as always.

    Regards- OJ
  • For those looking for an investment quite similar to CSCIX might I suggest that you consider one of two CEF's offered by the same C&S outfit with nearly identical portfolios. They are RQI (leveraged) or RFI (unleveraged). Just a thought. Personally I think the time to buy REIT's was back in early February when they were being taken to the woodshed along with anything oil but maybe there is still some mojo there. I own a few individual REIT's and RQI but have only added to one when it recently suffered a panic attack.
  • @Mark & MFO Members: Two of my core holdings, NLY and CIM are up 22.8% & 31.84% YTD, yielding 8.59% & 11.66%
  • Annaly (NLY) is always interesting and has had hot streaks for sure, up almost 28% this year if you reinvested divs. Oddly, if you can back 19y, to its beginning, you've done only a bit better than if you'd stuck with the smoother and broader FREAX.
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