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I am starting to diversify my portfolio and would like to add some REITS. Probably a REIT fund, but I am not sure at this point because I am still learning.

My question is: Is this a good time to get into them with interest rates rising? It looks like they have had quite a run up, and I don't want to make the mistake (that many investors do) of getting in at the last moment before the "correction". I realize that no one has a crystal ball, but I thought I would get opinions.

Also, does anyone have a good recommendation for REIT funds?

Tnanks,
Kris
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Vanguard REIT Index (VGSIX) which pays 6%. Low expenses at .24% and no load.

Read the post at this link from the Dividend Growth Investing discussion board here in Fooldom:

http://boards.fool.com/Message.asp?mid=21190169

David

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Hi, Kris,

Welcome!

Is this a good time to get into them with interest rates rising?

The "experts" can't agree, so anyone's guess here (including some experts) is as good as yours. For some other opinions, I suggest you read the 2nd article listed here:
http://boards.fool.com/Message.asp?mid=21405254

It looks like they have had quite a run up, and I don't want to make the mistake (that many investors do) of getting in at the last moment before the "correction".

A very valid concern, IMO. If I were investing new money into REITs at this time, I would do so very conservatively. For example, take at least a 12-month time frame, and use a dollar value averaging approach. If you're not familiar with DVAing, here's a brief description (you may have to page down a couple of screens):
http://www.lifestylepublishing.com/gifree.htm

Lastly, since you're new, you may wish to browse the board's FAQ (see the link at the top of the "Announcements" box to the right of this message).

Ken
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Thanks Ken. This looks like a very good place to start. I've dollar-cost averaged before, so I know the principle. I just am a little concerned about the steep run-up of REITS this year. I'm cheap and I hate to buy high :-).

Thanks again,
Kris
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Vanguard REIT Index (VGSIX) which pays 6%.

That's what I said, but I was wrong. It appears from Vanguard's website that the yield is currently at 4.21%.

David
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Kris,

This looks like a very good place to start. I've dollar-cost averaged before, so I know the principle.

I just wanted to be clear that I was advocating dollar value averaging, not DCA'ing. It's just a bit more involved, but (IMO) can be worth the extra work.

Ken
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Ken, could you explain dollar value averaging?
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Ken, could you explain dollar value averaging?

Probably no better than the link I provided:
http://www.lifestylepublishing.com/gifree.htm

But I can give it a try. It's similar to DCAing, but accounts for market movements, requiring you to put in more, or less, than DCAing would.

Let's say 12 months from now you want to have $12000 invested in something. DCAing would have you add $1000 each month for 12 months, period. Simple & easy, but your actual account balance will be more or less than $12000 -- it's highly unlikely to actually be $12000. DVAing says to adjust each month's amount by whatever is needed, based on the current market value, so that the total value of the position is the amount you would have invested with DCAing. Here's an example:

Jan 1 - Invest $1000
Feb 1 - Value is $1050. Invest $950; total value $2000.
Mar 1 - Value is $2190. Invest $810; total $3000.
Apr 1 - Value is $3340. Invest $640; total $4000.
May 1 - Value is $4230. Invest $770; total $5000.

Etc. In the first 5 months of investing into a rising market in this example, you will have a market total of $5000, but will have invested "only" $4170. With DCAing, you will have invested $5000 (but will have an even higher total account value, of course).

Once the market starts to head down, your required investments will obviously increase. The advantage I see of DVAing over DCAing is that you invest less when the prices are high, and more when prices are lower. (Which is also the goal of DCAing, but I think DVAing accomplishes this better.)

I seem to recall that there was a study that showed that DVAing was superior to DCAing, but I can't cite it. Perhaps someone else knows a link to one.

Ken

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Thanks, Ken. I really appreciate it. I definitely want to diversify using REITS, and the dollar cost averaging seems like a good way to do it while the market is high.
Kris
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I'm curious why you personally recommend DVA over DCA?

Gwen
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""The advantage I see of DVAing over DCAing is that you invest less when the prices are high, and more when prices are lower. (Which is also the goal of DCAing, but I think DVAing accomplishes this better."")
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Gwen,

I'm curious why you personally recommend DVA over DCA?

As missash quoted, I did give a cursory explanation for why I recommended DVA over DCA, especially with the market at "this" level. It just feels safer to me. However, despite a quick search, I was not able to find any studies that back up the supposed superiority of DVA over DCA. I wish I had time to do a study of my own, but I don't.

So anyone interested in using DVA should do so because they prefer to use it, not because I do. (Note that I'm not adding any additional money into this market, so I'm not using DVA or DCA.)

Ken
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