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Spice Up Your Salsa By Adding Some Intelligent REITs To Your Portfolio

Aug. 16, 2012 6:35 AM ETESS, FRT, NNN, O, SKT, UBA, UHT36 Comments

Yesterday I wrote an article, Build a Fortress Portfolio like an Intelligent REIT Investor, and in that article I explained the value of diversification and the argument that real estate should be a core asset class; based on returns, REITs have generated the highest returns over the last 40 years.

As Craig Israelsen, a personal and family finance Professor at Brigham Young University, explained (in article above),

Presumably, the assumption is that U.S. large cap equities are the bedrock asset class. That's not a ridiculous assumption, but it is an assumption. Somehow, other types of asset classes are presently labeled alternative. Traditionally, REITs have been put in that group.

REITs have been around long enough and generated solid enough returns that I don't view REITs as an alternative class. I view them as a core asset class.

Professor Israelsen, who also researches mutual funds and the design of investment portfolios, argues that

over a contiguous 42-year period from 1970 to 2011, REITs had a return of rough 11.5 percent. Large cap U.S. equities were somewhere around the 10 percent range. The argument for REITs as an investment is that it typically has a lower correlation to the benchmark asset class. What gets lost in that correlation argument is that REITs on their own generate very impressive returns.

Put Some Salsa in Your Portfolio

Professor Israelsen makes a great point and his suggestion that real estate should be more of a "core" asset component is certainly justified by historical evidence as well as the current economic performance trends. Accordingly, Israelsen advocates equally weighted portfolio allocations determined by a pre-designed core of assets utilized for each investor on an individualized basis. Professor Israelsen explains his diversification theory:

Great salsa is all about diversification. Only by adding diverse ingredients together can we achieve

This article was written by

Brad Thomas profile picture
Leader of iREIT on Alpha
The #1 Service For Safe and Reliable REIT Income

Brad Thomas is the CEO of Wide Moat Research ("WMR"), a subscription-based publisher of financial information, serving over 100,000 investors around the world. WMR has a team of experienced multi-disciplined analysts covering all dividend categories, including REITs, MLPs, BDCs, and traditional C-Corps.

The WMR brands include: (1) iREIT on Alpha (Seeking Alpha), and (2) The Dividend Kings (Seeking Alpha), and (3) Wide Moat Research. He is also the editor of The Forbes Real Estate Investor

Thomas has also been featured in Barron's, Forbes Magazine, Kiplinger’s, US News & World Report, Money, NPR, Institutional Investor, GlobeStreet, CNN, Newsmax, and Fox. 

He is the #1 contributing analyst on Seeking Alpha in 2014, 2015, 2016, 2017, 2018, 2019, 2020, 2021, and 2022 (based on page views) and has over 108,000 followers (on Seeking Alpha). Thomas is also the author of The Intelligent REIT Investor Guide (Wiley) and is writing a new book, REITs For Dummies. 

Thomas received a Bachelor of Science degree in Business/Economics from Presbyterian College and he is married with 5 wonderful kids. He has over 30 years of real estate investing experience and is one of the most prolific writers on Seeking Alpha. To learn more about Brad visit HERE.

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