Real Estate Investment Trusts - Time to buy?
Normally, this blog is about personal finance and lifestyle. Recently I have been on a kick of learning how to buy individual stocks and make smarter investments than I believe my current robo advisor can handle. Not that there is anything inherently wrong with a robo advisor, I have preached how good they are at keeping fees low and making investing a more streamlined experience for the user before.
It has been a common occurrence in the last few months that people are noticing the market in general not performing like it has in the past. All well and good if you are in it for the long haul, because I can guarantee that given a few more decades, growth will average out as expected ~7% after inflation. And that is a perfectly fine assumption to make for any highly diversified portfolio when you are planning on being in the game for a long time.
Personally, I am going to try to do better solely because at this point in time I find the prospect of beating the market somewhat of a challenge. Also, because I feel like it might be worth knowing the nuts and bolts and ins and outs of where our investments actually go once we make that deposit. What if you went through your robo advisers list of stocks and found some investments or companies that you didn't feel were going to perform well? Cool story, you can't do anything about it short of taking all the money out of the account or going to 100% bonds. Neither of those seems like a particularly intelligent solution, so I must move forward with something better.
I have decided to invest in the stock market with a reasonable and sane amount of money to get my feet wet. I will not be completely exiting my robo adviser because it has been good to me and didn't charge me an arm and a leg for service. I view it as an excellent fire-and-forget tool for wealth building and I always will. And I still am going to use dollar cost averaging to keep my inputs where they belong across the board.
So where am I investing you may ask? If you read the title of the article, you know already.
From a perspective entirely my own, it is obvious that real estate is not going south anytime soon. So why the slump everywhere? My belief is that anything labelled "REIT" or real estate investment trust is unfairly being pushed down right now by the following:
- Massive pressure from electronic distributors like amazon, walmart online, etc
- Commercial real estate and shopping malls in rural areas taking a beating (read: not in the silicon valley)
Whether or not you believe either of those things is going to manifest negatively is something that I do not need to address in this article. Why? Because I am not advocating buying commercial based REIT funds. There are different types and I don't want to engage in a trade war with Amazon and Walmart and Ebay for my hard earned cash. I am advocating a type of investment called RESIDENTIAL REITs. They are down too, but nobody knows why. Here is what is solid about the residential real estate market:
- Dividends are solid
- Housing market is solid
- Housing demand is solid
- Rents are solid and likely increasing
- Employment is high as hell
- Everybody worth their salt knows that middle america has a lot of catching up to do in the housing market compared to coastal cities
I have always been long on residential housing and real estate. It just absolutely cannot be put down. Even when the last crisis played out, it only made houses more affordable for a couple years. Let that sink in. The huge housing based financial crisis only managed to put a dent in the housing market for less than 10 years, and most places recovered well before today trust me!
So because almost all REIT prices are down and the residential market is looking up, as a fundamental investment I feel that residence-based REIT's are going for a jog while everything else kind of sputters. Also, there is a dip a mile long that you can grab. I mean it is quite a dip, just look at any graph and compare it to the stock market index of your choice. Take your time in picking which companies you believe are solid and be in it for the long haul, you'll do fine. I am hoping you will beat the market.
Disclaimer: Don't put all your money in the stock market and end up penniless and blame somebody on the internet, be sane about this process please.