Investing In REITs

by Dual Income No Kids on March 26, 2010 · 3 comments

Its trite and tired, but if you want to invest in real estate and don’t want to deal with directly managing your property, then your best option is a Real Estate Investment Trust (REIT).

If you feel your portfolio could use some exposure to real estate, here is a quickie from Kiplinger to get you started.

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{ 3 comments… read them below or add one }

1 Donnie March 26, 2010 at 2:42 pm

My 401k offers the Northern Trust Global REIT fund. It is nice and diversified, and has a low expense ratio.

2 Dual Income No Kids March 26, 2010 at 4:48 pm

Donnie – thats good! Many plans do not offer that kind of option.

3 Anonymous March 28, 2010 at 5:06 am

Before I moved to Hong Kong I had a TIAA-CREF 403b plan (this is the common retirement plan of American-based university employees). Interesting thing about TIAA-CREF: they don't offer access to any established REIT ETFs; instead, they buy their own properties. I had a 20% real estate allocation, and I would from time to time receive a notice in the mail that TIAA-CREF had just bought, e.g., an office building in Manhattan or a shopping center in Boston.

On another note: For a while I held shares of Vanguard's REIT index ETF– it holds US-based REITS– and I have considered buying WisdomTree's international real estate ETF (DRW), which is weighted not by market cap but by which companies pay the highest dividends. It's 25% Hong Kong, 17% Australia, 15% France, 13% Japan, and 10% Singapore. But its expense ratio is .58%, which is higher than I usually go. I'm considering, instead, buying some of the individual REITS that it holds, such as Stockland (it trades on the Australian exchange– and I have an Interactive Brokers account, which allows purchases directly on the Australian exchange).

Aside from the high expense ratio, I'm always cautious about buying an index ETF for REIT exposure, because some of the underlying stocks are in fact huge conglomerates that aren't entirely real estate plays. E.g., the #5 holding of the WisdomTree fund is Cheung Kong, which makes a lot of its money from investments that are only loosely connected to real estate. That's not entirely bad, but if I'm looking for REITs to add real estate to my portfolio, then perhaps I'm better off going straight to individual companies that are more directly focused on collecting rents.

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