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I have a REIT in a Vanguard Roth account and so far, it is outperforming my target fund which includes total stock U.S. and international and total bond U.S. and international.
Taxes are irrelevant because it is in a Roth. I like the dividends and use them to buy more and more of the REIT.
Usually but trusts like mlp and reits are a little different. They are pass through so dividends don't come out of stock price exactly
It's like how a rental income doesn't determine house value. You aren't selling the "doors and windows" to generate an income. Still related since a good house is worth more and can command higher rents but example fits?
O is just getting ridiculous. It is yielding 3.5% now. I'm almost thinking I should sell out and get back in when it comes back to earth. Seems like people are really chasing yield right now.
Less today (like 3.3%). I don't know much if anything about REITS (have never bought one) - but shouldn't real estate yield more - perhaps a lot more - than things like utilities or muni bonds? FWIW - I wouldn't just sell out on some arbitrary day at some arbitrary price (unless I was extraordinarily gifted in calling market moves in advance - which I'm not). Because interest rates can continue to go down - and the manic search for yield can continue (although I can't predict the top or when it might occur). If I owned something like this (I don't) - I would trade it on the basis of technicals (which is how I trade some other things). But that may not be your cup of tea. Still - I think it's dangerous to dump things just because you think they're overvalued.
Note that the XLU (utilities) - which I own - is yielding about 3.1% today. And the muni market has really gone nuts in the last month (I bought some Massachusetts GOs about a month ago at about 3.1% - and they're priced to yield maybe 2.9% today - which is a pretty big move in muni-land). I think we're in a blow-off phase with fixed income now - but who knows how far it will go? Robyn
This got me curious about correlations between the Vanguard REIT index fund and the Vanguard Total Stock Market Index Fund...
Why would you care about correlations? Seems to me that when things blow up - almost everything goes down (except perhaps some bonds at some times - maybe something like gold at times - and - of course - cash). If an economy blows up and there's a recession - it seems to me it will push down the price of stocks and real estate. Also - real estate tenants may stop paying rent - or want better deals.
I remembered why I never bought a REIT. It's because of the possible (although perhaps remote) tax consequences of holding them in IRAs:
It's why I've never owned something like a commodity ETF (which I've found more tempting at times than REITs) in my IRAs either. Life is too short to worry about getting bitten in the you-know-where by taxes. Robyn
Why would you care about correlations? Seems to me that when things blow up - almost everything goes down (except perhaps some bonds at some times - maybe something like gold at times - and - of course - cash). If an economy blows up and there's a recession - it seems to me it will push down the price of stocks and real estate. Also - real estate tenants may stop paying rent - or want better deals.
I remembered why I never bought a REIT. It's because of the possible (although perhaps remote) tax consequences of holding them in IRAs:
It's why I've never owned something like a commodity ETF (which I've found more tempting at times than REITs) in my IRAs either. Life is too short to worry about getting bitten in the you-know-where by taxes. Robyn
that's not an issue in Roths. I hold all of my REITs in Roths.
that's not an issue in Roths. I hold all of my REITs in Roths.
Why do you think it's not an issue in Roths? I could be wrong - but tend to doubt it. Can you find a link? Note that the UBIT is a tax owed by the IRA. Robyn
Why do you think it's not an issue in Roths? I could be wrong - but tend to doubt it. Can you find a link? Note that the UBIT is a tax owed by the IRA. Robyn
Despite the general application of exception to UBIT/UDFI tax for REITs, a REIT may be operated in a manner that will not allow for qualified dividends to be paid and therefore income from the REIT would not be exempt from UBIT/UDFI tax. If you’re investing into a REIT with an IRA, make sure you know whether the REIT intends to be exempt from UBIT/UDFI tax or not. As discussed, most will be exempt from UBIT/UDFI tax but some REITs may choose to operate in ways that will not qualify for the exception. Because UBIT/UDFI tax is about 39% at $10,000 of annual income this is something every IRA should understand before investing into a REIT.
Robyn
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