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Interest rates

CrashCrash
in Off-Topic
We all know that the Fed raised rates last time they met, and we expect probably 3 more steps upward in 2017. But it seems that the (benchmark) 10 Year cannot find the elevator, eh? I'm bring this up with an eye toward my TRREX. Real Estate is of course, correlated to rates. I've been quite ready to dump it and put the proceeds elsewhere. Would it be foolish to neither sell nor buy any more of it, for the foreseeable future, and just let it run--- or sit?

Comments

  • Old_Skeet
    edited April 2017
    In short words ... I'd sit. One can never know where the hot money crowd will venture. And, I am looking for real estate to perform well as landlords can usually raise rents in a rising interest rate envirnoment. Currently, I have about 5% of my allocation in real estate and have no plans to reduce it.
  • MikeMMikeM
    Good question @Crash. Here is some info from Investopedia on the correlation between REITs and interest rate hikes. You can probably get what you need to know from the summary I copy-pasted below.

    If you are going to switch the fund to another sector bet, farther below is a Charles Schwab article with suggestions. The article is 1 year old which is an interesting view - they were right.

    http://www.investopedia.com/articles/04/110304.asp
    Summary
    The 15-year period examined above shows there is a strong inverse relationship between REIT prices and interest rates. On average, it would be safe to assume that interest rate increases are likely to be met by REIT price declines. Of course, reaction by sectors will vary. For example, some argue that in the case of residential and office REITs rising interest rates would drive up REIT prices because increasing rates correspond to economic growth and more demand. But you will need to be selective in such an environment. The good news about REITs is that high yields are a sort of hedge against price declines: if you buy a high-yield REIT, any price decline will be mitigated by high income in the meantime.
    A 1 year old Charles Schwab report on where to invest during rising rates. 1 year ago they said financials and technology. Guess what, they were right.
    http://www.schwab.com/insights/stocks/sectors-that-may-thrive-when-rates-rise

    Good luck on your decision.
  • CrashCrash
    Replies are appreciated. Thanks for the thoughtful responses and the links. My only dedicated RE fund TRREX is 3.32% of total portfolio right now, but other funds I own dabble in RE, too. The X-Ray shows that 7.26% of my total is in RE. The quarterly div isn't much, at this point: $27, paid on 31st March. A while ago, i took my RE portion down from over 11% of total. I suppose that was just prudent. Whether or not it was timely, I dunno. I'm not trying to time Markets, just don't want to be behind the curve.
  • MikeMMikeM
    In my opinion, sector specific funds are not needed as long term holdings in a portfolio. As you point out, your overall portfolio is already being addressed for REITs by your fund managers. The exception may be heath care. Short term bets on sectors I can understand if you know how to follow trends in and out. But, my 2 cents isn't worth much more than that. So good luck with your decision.
  • VintageFreakVintageFreak
    edited April 2017
    I have long lamented I'm no 007 (except when it comes to chosing stirred and not shaken). Recently I sold my DLRFX in my IRA. My heart and my mind seem to be finally coming together after reading so much about interest rates, bonds, income whatever.

    I'm going to rely on my ANALysis to either be in equities or cash. That's it. I'm done.

    I'll buy some balanced funds hoping managers know WTF they are doing - OAKBX, ICMBX, etc.etc. but other than that I'm simply going to stop fretting about income investments and "yield" of my portfolio, etc. I'm just not that smart.
  • CrashCrash
    :)
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