REITs - Real Estate Investment Trusts - Info & Discussion: Re: REITs and the S&P500

» Kirk - Re: REITs and the S&P500

In response to message posted by RhyneN:

Hopefully Jen can post the REIT article. Sounds interesting.

I watched Wall Street Week with Louis Rukeyser last night and the guest was talking about how now is the time to sell defensive issues as they have had their run and money will flow to areas of the market that are less defensive as the economy bottoms and turns. He defined defensive issues as those with low P/E but good dividends (usually due to a mature industry or little growth). He did not mention REITs specifically, but they sure came to mind for me.

At this point in the stock market cycle, where equities are way down, interest rates are low and REITs and Bonds have had a good run, I would advise against moving equity monies into bonds or REITs (unless you are about to retire and want a more conservative asset allocation). Now that "they" are talking again of adding REITs to the S&P500, I'd look at it as a contrarian sign much as the untimely removal of RiteAID from the S&P500 and replacement with JDSU just before RiteAid doubled and JDSU went from $140 to $7.
http://stockcharts.com/def/servlet/SC.we...

When the market turns, people won't be as risk averse as they are now and so REITs will lose some of their appeal. Now if you are talking about moving some of your bond portfolio over to REITs, then that is an interesting idea worth discussion. REITs should pay a bit more than total bond or GNMA but the credit quality is not as high and the operating expenses (don't the individual REITs, even in an index, have fairly high management fees or at least property managers to pay?) are a consideration.

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-- posted by Kirk