tintinParticipantStatus: SpousePosts: 22Joined: 01/07/2019
What are the pros and cons of investing in REITs vs bonds for the fixed income portion of a portfolio?
A REIT’s return can be higher and the money is in theory invested in real estate which allows you to diversify.
I understand that a REIT can loose value if real estate market goes down or if the REIT does a poor job in buying good properties or is not able to manage/find good tenants etc.
Please help me understand the pros and cons.January 8, 2019 at 8:46 am MST #179562JBMEParticipantStatus: SpousePosts: 439Joined: 03/26/2018
you should treat an REIT as an equity, not as a bond. it fluctuates much more like an equity than a bond. An REIT’s returns can be higher is what you bolded, but yes, the return can also be lower. Also, REITs pay out a lot of dividends. Not sure what your retirement status is but if you’re still working, REITs are best in a Roth IRA and certainly not taxable account. Bonds are best in a 401k/tax-deferred account unless you’re closer to retirement.
Others I’m sure will discuss the details of what an REIT is. There are several articles on this site that discuss themjhwkr542ParticipantStatus: PhysicianPosts: 1142Joined: 02/15/2016
I don’t consider real estate an option for FI. Both tend to be not correlated as much with the stock market although a total market index fund will have some REITs included. Bonds will be more stable and less correlated with stocks. Many people including myself add a little more REITs to their portfolios, but I put it in the equity portion of my allocation (or consider it a separate class altogether).PedsParticipantStatus: PhysicianPosts: 3791Joined: 01/08/2016January 8, 2019 at 10:44 am MST #179601