At what point do I want to add a REIT Index Fund to my portfolio? Do I want to add a REIT Index Fund to my portfolio?
I would want it to be 10% of my stocks allocation or 9% of my overall allocation. Since Vanguard requires a minimum of $3,000 to invest in a fund, my total portfolio would have to be valued at $3,000 / 9% = $33,333.33, which will definitely happen this year.
If I want to add a REIT index fund to my portfolio this year, then using my Roth IRA contribution for that would be perfect since I should keep the REITs not in taxable.
It looks like Vanguard charges a 1% fee to redeem shares of their REIT Index Fund before you’ve held them for one year, which means that I should be reasonably confident about this choice before making the purchase.
Since the fund would go in my Roth IRA, I have some time to think it over before I need to make a decision.
What are the cons that I can think of for investing in a REIT index fund:
- My current investment strategy attempts to replicate the market’s proportions, but this would be over-weighting a specific sector.
- This would add additional complexity to my portfolio since it’s another asset class in my asset allocating/re-balancing spreadsheet and another fund in the implementation.
- It isn’t in my 401(k) plan and most likely wouldn’t be in future employers’ 401(k) offerings either, meaning that I would need to be able to keep it in either my Roth IRA or a future Rollover IRA.
- I’m buying a condo, which is adding a real estate asset. Do I want to put money into more real estate?
- I already have some REITs in the other index funds I own – as of 9/30, Vanguard’s S&P 500 Index fund was at 1.78% real estate and their Extended Market Index fund was at 7.39% real estate. (This means that I currently have about 1.5% of my portfolio in real estate.)
Well, that doesn’t make this sound like a very good idea. What are some pros to investing in a REIT index fund?
- My real estate holdings would be more diversified than just my single condo in a single city in the US.
- It would add commercial real estate holdings to my assets.
- The returns of Vanguard’s REIT Index Fund seem to be completely different from the returns of the US stock market overall.
Readers, do you have an REIT index in your asset allocation? At what point did you add it?