REITs - Real Estate Investment Trusts - Info & Discussion

» Kirk - REIT vs S&P500 - 1970 to 2004

When interest rates start to go up again, it would be a good time for the REIT/S&P500 ratio to change

Year-to-date:
 
  Date       Kirk    S&P500   Delta
2003 YTD    +74.3%   22.5%    51.8%  as of 12/07/2003 
 

Total Return:
                                 Kirk   S&P500+  NASDAQ 
4.75+ Yrs 12/31/98 to 12/07/03  167.3%  ( 7.5%) (11.6%)
Annualized Annual Return         22.0%  ( 1.6%) ( 2.5%)  
 
  
9/30/98 Inception Value:   $100,000
9/30/03 5 yrs later value: $345,395 up 245.4%
S&P500 between 9/30/98 and 9/30/03: up   4.6%
With dividends reinvested. All Numbers unaudited. 
Click for a free issue of my newsletter 
Suitable for the aggressive growth part of your 
diversified investment portfolio. 

-- posted by Kirk

» bob90245 - Where to put REITs question

Thanks in advance.

Bob

-- posted by bob90245

» Kirk - Re: Where to put REITs question

Your plan makes sense to me. I have a variable annuity at Vanguard I bought in 1992 or 1993 that I use for foreign funds so they can compound without taxes until I retire. I think an annuity at Vanguard makes sense IFF (if and only if) you need to add fixed income to your asset allocation and it can only be done with taxable money. I think you do much better for equities in index funds since you pay the long term capital gains rate when you eventually take the money vs. normal income tax rate used for annuities and IRAs.

-- posted by Kirk

» Kirk - REIT Index: 1970 – 2004 Bull Market Chart.

<img src=http://www.chartoftheday.com/20040225.gif width=454 height=340>
http://www.chartoftheday.com

         PERIOD                Kirk  Wilshire5000  Delta
1 Year Return to 12-31-2003    +77%     +31%         46%  
3 Year Return to 12-31-2003    +25%      -7%         32%  
5 Year Return to 12-31-2003   +171%      +2%        169%  

 

Total Return:
                                  Kirk   S&P500+  NASDAQ 
5 Yrs 12/31/98 through 12/31/03  171.0%  ( 3.0%)  ( 8.6%)
Annualized Annual Return          22.1%  ( 0.6%)  ( 1.8%)
 
Click for a free issue of my newsletter 
Suitable for the aggressive growth part of your
  diversified investment portfolio. 

Bob Brinker, Bob Brinker, Bob Brinker, Bob Brinker, Bob Brinker, Bob Brinker, Bob Brinker, Bob Brinker

-- posted by Kirk

» bob90245 - Re: Re: Where to put REITs question

Thanks for the reply, Kirk. And let me follow up on this.

I called the number for Vanguard's Annuity. And spoke to a very helpful phone rep. He made great pains to give me both the pluses and minuses of their Annuity program along the lines of tax considerations, etc. I told him my reasoning to shelter dividend income in order to reap greater long-term compound growth.

Then after the call, I thought about it some more. And I remembered seeing the historical growth for both dividends and capital appreciation for the REIT index fund. If my memory serves, half the total return is from dividends and the other half from capital appreciation. So I figured, it may be a toss-up because on the one hand, the dividends will benefit from tax-sheltering. But on the other hand, the appreciation of NAV does not need sheltering and in fact, will be taxed at higher ordinary rates when funds are withdrawn from the annuity (as opposed to lower capital gains rates from a regular account).

So, in the end, I decided to buy the REIT index in a regular taxable account.

Bob

-- posted by bob90245

» Normxxx - Re: Re: Re: Where to put REITs question

Steer clear of annuities! The costs almost always overwhelm any tax advantages and seriously add to your pain if the market goes nowhere to down.

-- posted by Normxxx

» bob90245 - Re: Re: Re: Re: Where to put REITs question

Norm, you are correct to caution about variable annuities. One reason I was looking into Vanguard Variable Annuities is that they have lower expenses: 0.62% versus 2.23% for the average variable annuity at other fund families. For most asset classes, variable annuities would not be suitable as you stated. However, where a significant part of the total return is paid in current dividends, tax deferal may have a place - especially if one is in a high marginal tax bracket and will hold the annuity for the long term (15+ years). As I decided with REITs, this asset class would probably not derive enough benefit from a variable annuity. Another asset class to consider for a variable annuity might be junk bonds. And as I see from Vanguard's website, they do offer a High Yield Bond Variable Annuity with a current yield of 5.86%. Do not consider this a recommendation - just FYI.

Bob

(Sorry for being off-topic)

-- posted by bob90245

» Normxxx - Re: Re: Re: Re: Re: Where to put REITs question

FWIW, I believe REITs and Hi-Yield Bond Funds to be overpriced for new money. The risk/reward ratio has increased too much. I would hold until the downturn (probably not until the fed increases rates, which may not be for some time yet). I really do not know where to put new money and am just building cash at this point.

I don't think you can plan for 15+ years. I doubt you can plan for 5+ years. In these times, you have no way to know in advance what the best asset classes are likely to be. So the rule is to stay flexible and be prepared to switch. In Industry, they prepare 5 year plans which are updated every 6 months.

-- posted by Normxxx

» suzana1 - Need an informed opinion about a particular REIT Where's Makena

-- posted by suzana1

» radiodude - oops, there goes my REIT

I still plan to hold on and sell it in about 20 years if all goes according to plan. I see no reason to bail out.

.

-- posted by radiodude