REITs deserve to be considered a separate asset class due to unique attributes.REITs have bond-like characteristics such as steady income, interest rate sensitivity, and asset backed protection.REITs
Sourced through Scoop.it from: seekingalpha.com
Do you feel like your portfolio is missing something? Maybe it could be REITs. When someone in the investment management industry has a different perspective on how to handle REITs, we like to let you know about it.
Making REITs a separate asset class in your portfolio is the latest tactic we’ve heard about. Due to their dual nature of both bond and equity-like behavior, it can be argued that REITs deserve separate treatment; especially if you have other real estate assets, REITs can be bundled together under a ‘Real Estate’ bucket.
If you are looking for something other than the traditional 50-50 portfolio (50 percent equity, 50 percent bond), Ben Strubel from Strubel Investment Management states that composing a 45/45/10 (10 percent being REITs), can enhance your portfolio. It appears that the REITs’ equity-like side boosts returns and the bond-like side can reduce your risk. And according to Ben, you will end up better off in the long run with this type portfolio than with a 50/50 one.
If you are interested in this idea, but you don’t yet know anything about REITs, you could try ETFs. The Vanguard REIT ETF (NYSEARCA:VNQ) is one of our most popular and we use it as a benchmark in many of our analyses. Later on, once you feel more confident, you can start testing the waters on individual stocks.
When it comes to managing your portfolio, with or without REITs, it’s all about taking the first step.
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Disclosure: The author has no positions in any shares mentioned, and no plans to initiate any positions within the next 72 hours.