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Counterpoint: 10-year REIT returns: 7.59% annually 10-year US stock market returns: 7.54% annually Looks similar, except that remember: 2006 was the peak of

by dimva 10y ago

Counterpoint: 10-year REIT returns: 7.59% annually 10-year US stock market returns: 7.54% annually Looks similar, except that remember: 2006 was the peak of the real estate bubble. This would be like judging 10-year US stock returns by starting at the year 2000 - it'd be negative. Since its inception in 2004, VNQ has returned an annual return of 10.04%, approximately 3% higher annual return than the stock market. I don't think this should be the case - buying property and sitting on it shouldn't give you a higher return than investing in the real economy. But, with our anti-development government policies, this is what ends up happening. Sources: https://personal.vanguard.com/us/funds/snapshot?FundIntExt=INT&FundId=0986 https://personal.vanguard.com/us/funds/snapshot?FundIntExt=I... https://personal.vanguard.com/us/funds/snapshot?FundIntExt=INT&FundId=0970 https://personal.vanguard.com/us/funds/snapshot?FundIntExt=I...

compumike 10y ago
On one hand, note that holding REITs is pretty different than "buying property and sitting on it"; these companies charge rents to real businesses & apartment-dwellers. They will (on average) generate and distribute profits from that activity even if the underlying property value remains completely flat. I'm not sure how that's different from "investing in the real economy" -- the apartment-dwellers or office-dwellers are happy to hand some profits over to the landlords in exchange for being able to be in a place with access to good jobs/culture/etc, and for the flexibility of not being locked down to that property. On the flip side, there is a "financial economy" side to it too. They're leveraged (as is an individual mortgaged homeowner). If property values do go up, and if interest rates do fall, then yeah, the REITs are going to be extra juiced -- this has happened over the time period you highlighted. But not without risk, too. In 2007-2009, the maximum drawdown (peak to trough) in VNQ was -73%; that's a lot worse than the -55% for VTI.
paulpauper 10y ago
well but the author is a Nobel Prize winner and you're not ..so ...umm.. .counter evidence be damned
tuna-piano 10y ago
Is owning a plot of land in times square really different than owning the Coca-Cola copyright? You own a real income producing, and value creating, asset either way.

by dimva 10y ago

compumike 10y ago

On one hand, note that holding REITs is pretty different than "buying property and sitting on it"; these companies charge rents to real businesses & apartment-dwellers. They will (on average) generate and distribute profits from that activity even if the underlying property value remains completely flat. I'm not sure how that's different from "investing in the real economy" -- the apartment-dwellers or office-dwellers are happy to hand some profits over to the landlords in exchange for being able to be in a place with access to good jobs/culture/etc, and for the flexibility of not being locked down to that property. On the flip side, there is a "financial economy" side to it too. They're leveraged (as is an individual mortgaged homeowner). If property values do go up, and if interest rates do fall, then yeah, the REITs are going to be extra juiced -- this has happened over the time period you highlighted. But not without risk, too. In 2007-2009, the maximum drawdown (peak to trough) in VNQ was -73%; that's a lot worse than the -55% for VTI.

paulpauper 10y ago

well but the author is a Nobel Prize winner and you're not ..so ...umm.. .counter evidence be damned

tuna-piano 10y ago

Is owning a plot of land in times square really different than owning the Coca-Cola copyright? You own a real income producing, and value creating, asset either way.