Investing in REIT funds provides a steady stream of dividents, but these dividents are taxed at the normal income rate, unlike other mutual fund investment dividents. Thus, my question is... if I am in my thirties does it make sense to have some REIT in my portfolio? Obviously for someone retired, this investment vehical has lower tax implications. So I see this as a grades scale... with small percentage early on and possibly growing as I age. Does this make sense?
2007-03-28 02:22:44 · 6 answers · asked by DoorWay 3 in Business & Finance ➔ Investing
Bear in mind some of the dividends will be reclassified as return of principal (box 3 in 1099s). Trouble is, you won't find out until you receive the 2nd revised 1099 from your broker sometime during the 3rd week in March or later. So don't expect to get your taxes done early.
I also liked (notice past tense) the dividends and held reits. If I was back in my 30's again, I would stay with growth stocks/funds with the "qualified" dividends and capital gains. Then I would (as I am doing now) go with tax-free (both federal & state) muni bonds instead of REITS. There are some closed end muni funds that have a very similar tax equivelent yield. Some say you should have some REITS to diversify but it is possible to be too diversified. My general all around mutual funds have reits in them. Good enough for me.
2007-03-28 02:44:05 · answer #1 · answered by gosh137 6 · 1⤊ 0⤋
You should take a look at the returns of REITS over the last 5 & 10 years (Look at KIMCO, symbol KIM, or look at several of the many no load Mutual Funds available).
American Century Real Estate Inv Mutual Fund (REACX) is up an average of 23% a year over the past 5 years.
The growth of the net asset value makes the dividend look insignificant.
Bottom Line: REITS should be part of your ASSET ALLOCATION. My guess.... 5% - 10%. (Make up your own mind on that).
Once you look at the charts you'll be amazed. I only got in 2 years ago...... I wish I had done so prior to that! IGNORING REITS HAS COST ME GROWTH !...... don't do the same!
2007-03-28 03:06:54 · answer #2 · answered by Common Sense 7 · 0⤊ 0⤋
They're a good solid way to invest in real estate without the headaches of direct property ownership. They should part of a mix, not the bulk. Do your homework. I would not choose one whose main business is residential. Too risky for me. Commercial properties are good and I think it's also time to look ar REIT's that specialize in retirement residences. That is a growing segment. Also I think industrial property ownership can be risky as well. The best thing about whichever REIT sector you choose is you get geographic diversification immediately. You not investing in 1 region and risking localized economic depressions. They can be a great part of you portfolio's income segment. Do it, but do your homework first as with all investments.
2007-03-28 06:24:04 · answer #3 · answered by kman 2 · 0⤊ 0⤋
REITs have a place in your portfolio even if you are in your 30's, for diversification purposes. Buy funds that invest in REITs...that's a good way to diversify... and have additional growth potential.
2007-03-28 06:17:39 · answer #4 · answered by It is what it is 3 · 0⤊ 0⤋
Put reits in your ira that way you avoid paying the ord incom divs. Look at UITs that have reits in them, keeps turnover lower.
2007-03-28 05:35:47 · answer #5 · answered by pretzel2222 3 · 0⤊ 0⤋
REIT dividends in a Roth Ira are never taxed.
2007-03-28 08:30:20 · answer #6 · answered by gregory_dittman 7 · 0⤊ 0⤋