What % do you have in alternatives? REITs, commodities, etc.)

neomutiny06 · Post by **neomutiny06** » Mon May 16, 2016 7:51 am

Alternatives, which I am defining as REITS, commodities, and perhaps sector funds.

What percentage of your portfolio includes them? Some experts say 0% is fine, not a necessary asset class. However, some have 10-15% in REITS, 5% in commodities, etc.

Thoughts?

midareff · Post by **midareff** » Mon May 16, 2016 8:02 am

Is small value a sector? High yield?

livesoft · Post by **livesoft** » Mon May 16, 2016 8:03 am

We have about 8% of the total portfolio value in the TIAA Real Estate account. A thread on this fund: viewtopic.php?t=123075

azanon · Post by **azanon** » Mon May 16, 2016 8:09 am

I thought REITs and sector funds are just stocks. Am I missing something?

neomutiny06 · Post by **neomutiny06** » Mon May 16, 2016 8:17 am

neomutiny06 wrote:Alternatives, which I am defining as REITS, commodities, and perhaps sector funds.

What percentage of your portfolio includes them? Some experts say 0% is fine, not a necessary asset class. However, some have 10-15% in REITS, 5% in commodities, etc.

Thoughts?

staythecourse · Post by **staythecourse** » Mon May 16, 2016 8:50 am

azanon wrote:I thought REITs and sector funds are just stocks. Am I missing something?

REITS are actually different despite being stocks. The special tax treatment of the corporate structure makes it somewhere between a stock and a bond (like Mr. Swensen like to say). The fact they HAVE to disimburse 90% or more of the revenue makes REITS a bit different. Because of that you may have different folks investing in it then you would find with other stocks.

Good luck.

bertilak · Post by **bertilak** » Mon May 16, 2016 9:08 am

RETIs:

According to Personal Capital my VTSAX (Total US stock market) is 4% REIT. If developed International stocks (VTMGX) are included it is about 3%. Overall, in my 60/40 portfolio, it is about 2%

Commodities and anything else:

None

jhfenton · Post by **jhfenton** » Mon May 16, 2016 9:14 am

Over and beyond our general domestic and equity funds, we have 5% each in VGSLX (Vanguard REIT Index Fund Admiral Shares) and VGRLX (Vanguard Global ex-US Real Estate Index Fund Admiral Shares). (That's 5% each of equities, which is currently 97% overall.)

We don't hold anything else that might be considered alternative investments. I do not see the benefit of adding direct commodities exposure.

riptide · Post by **riptide** » Mon May 16, 2016 9:18 am

10 % in Reits
10% in Small Cap value

DetroitRick · Post by **DetroitRick** » Mon May 16, 2016 9:20 am

Generally, 5 to 6%, split amongst REITs (ETF), gold (ETF) and commodities (mutual funds). For most of my investing life, I maintained 0% (except for REIT's held by equity funds) in these categories. But as I approached withdrawal time for my IRAs, I felt more comfortable with a little "extra" diversification.

bigred77 · Post by **bigred77** » Mon May 16, 2016 9:21 am

I "tilt" with 25% of my total portfolio (1/3 of my total stock allocation) into riskier sub asset classes.

I put 5% of my total portfolio each into the following: US Small Cap Value, International Small Caps, Emerging markets, US REITs, International REITs.

gkaplan · Post by **gkaplan** » Mon May 16, 2016 9:43 am

Zero.

KyleAAA · Post by **KyleAAA** » Mon May 16, 2016 9:44 am

10% in REITs.

I also small/value tilt, but I'm assuming that's not what you meant.

Church Lady · Post by **Church Lady** » Mon May 16, 2016 9:53 am

I used to have an allocation to commodities in my 401K, but decided it was too volatile for my blood. For what it's worth, the 'target' funds offered by my 401K have an allocation to commodities.

I have 5% of my 401K in REITS. For optimal tax efficiency, I should probably move it to my Roth accounts (so as not to have return of capital eventually taxed as ordinary income).

Read here to find out why as of Sept 1 REITS will become a major asset class in their own right: http://seekingalpha.com/article/3967921 ... food-group

Effective the start of trading on September 1, 2016, real estate will be promoted out of Financials into its own standalone sector - the first time that a new sector has been added to the GICS since its inception in 1999. This change is the result of multi-year discussions officially initiated on June 2, 2014 and confirmed on November 10, 2014, with feedback solicited up until February 13, 2015.

azanon · Post by **azanon** » Mon May 16, 2016 10:14 am

staythecourse wrote:
azanon wrote:I thought REITs and sector funds are just stocks. Am I missing something?

REITS are actually different despite being stocks. The special tax treatment of the corporate structure makes it somewhere between a stock and a bond (like Mr. Swensen like to say). The fact they HAVE to disimburse 90% or more of the revenue makes REITS a bit different. Because of that you may have different folks investing in it then you would find with other stocks.

Good luck.

Don't get me wrong, I'm definitely a fan of the sector and am glad I have a nice dollop of REITs already by virtue of my having a sizeable stake in the extended market index fund (its 37.5% of my equities).

heyyou · Post by **heyyou** » Mon May 16, 2016 10:34 am

10% Sm Value, 10% EM, 10% REITs, spent 10% on PCRIX a decade ago

TheTimeLord · Post by **TheTimeLord** » Mon May 16, 2016 10:35 am

2% in MLPs. Bought them a back in 2008 and sitting on some gains. Probably should have sold back last August.

ruralavalon · Post by **ruralavalon** » Mon May 16, 2016 10:58 am

azanon wrote:I thought REITs and sector funds are just stocks. Am I missing something?

Vanguard REIT Index Fund is a sector fund, the sector is commercial real estate investment trusts.

Vanguard REIT Index Fund is a stock index fund.

Many people consider real estate a separate asset class.

We hold Vanguard REIT Index Fund Admiral (VGSLX) at 5% of portfolio, 10% of stocks.

We hold no other sector funds, "alternatives" or commodities.

asif408 · Post by **asif408** » Mon May 16, 2016 10:59 am

I have 10% in REIT (1/2 US and 1/2 Int'l). On my bond side I have another alternative, a stable value fund yielding 3.5%, that I use for half of my bond portion. Obviously not everyone has this option but I think it's a great interest rate hedge for the bond portion.

I would agree that 0% is probably fine for most people. I've considered small allocations to precious metals equities and energy stocks as inflation hedges but haven't pulled the trigger on these yet. I think the thing with alternatives such as REITs (and especially commodities/precious metals) is to rebalance, as they tend to be (though not always, as I'm sure someone will highlight 2008) less correlated to the overall stock markets and a majority of your bonus return (if any) comes from the rebalancing process. If you don't want to have to deal with rebalancing I wouldn't recommend alternatives and would stick with plain vanilla total market funds.

JZinCO · Post by **JZinCO** » Mon May 16, 2016 11:09 am

10% marketplace lending (LendingClub & Fundrise)
10% REIT (VNQ)
4% int'l REIT (VNQI)

I am slowly decreasing my position in marketplace lending.
I would like to collapse US & Int'l REIT, but access to all-world REIT funds are uncommon inside administered plans.

I also have some small undesired bit in commodities because of a lifecycle fund in my 457.

SpringMan · Post by **SpringMan** » Mon May 16, 2016 11:24 am

2% of total portfolio is REITS. 0% commodities. No specific REIT fund, just those that are present in other funds. Total portfolio is 40/60.

k66 · Post by **k66** » Mon May 16, 2016 12:01 pm

gkaplan wrote:Zero.

Ditto

azanon · Post by **azanon** » Mon May 16, 2016 12:46 pm

ruralavalon wrote:
azanon wrote:I thought REITs and sector funds are just stocks. Am I missing something?
Vanguard REIT Index Fund is a sector fund, the sector is commercial real estate investment trusts.

Vanguard REIT Index Fund is a stock index fund.

Many people consider real estate a separate asset class.

We hold Vanguard REIT Index Fund Admiral (VGSLX) at 5% of portfolio, 10% of stocks.

We hold no other sector funds, "alternatives" or commodities.

Right, but there is a difference between real estate and real estate investment trusts. As you correctly stated, the latter is a sector in the stock market, traded on the stock market exchange.

..................

To answer the OP question, i have 7.5% in gold (IAU) and 7.5% in a commodities futures ETF (USCI). The rest is stocks and bonds.

krannerd · Post by **krannerd** » Mon May 16, 2016 1:26 pm

4% in REITs and 3% in commodities as part of a target date retirement fund.

inittowinit · Post by **inittowinit** » Mon May 16, 2016 1:28 pm

5% REITs, 20% small-cap value, 10% EM, 15% ex-US small-caps

The rest is VTSAX and VTIAX.

Elsebet · Post by **Elsebet** » Mon May 16, 2016 2:20 pm

This is the bulk of my Roth/Rollover IRA:

US Equities
FUSVX SPARTAN 500 INDEX FD ADVANTAGE CLASS 5.99%
FSRVX SPARTAN REAL ESTATE INDEX FID ADV CLASS 6.03%
FSTVX SPRTN TOTAL MKT INDX FID ADVANTAGE CLASS 27.97%
FSSVX SPARTAN SMALL CAP INDEX FID ADV CLASS 4.2%

International Equities
FSIVX SPARTAN INTL INDEX FID ADV CLASS 8.47%
FPMAX SPARTAN EMERGING MKT INDEX FID ADV CL 14.98%

Bonds
FSITX SPARTAN US BOND INDX FIDELITY ADV CLASS 23.5%

The rest of my portfolio is some miscellaneous stuff like a few individual stocks still down and leftover from my more active trading days, some single US Treasury bonds I bought before moving to the bond index fund, and a tiny cash amount. I bought the FSRVX, FSTVX, and FSSVX before I discovered the magic of the Total Market fund. I also want to lessen my FPMAX position in favor of FSIVX over time.

My work 401k is much simpler:

70% VANGUARD INST INDEX , PLUS
30% VANGUARD TTL BND MRK INDX INST

Leeraar · Post by **Leeraar** » Mon May 16, 2016 2:22 pm

Zero.

I found a KrugerRand in my sock drawer, but I sold it. (Really. My father gave it to me, I had forgotten I had it.)

L.

topper1296 · Post by **topper1296** » Mon May 16, 2016 2:24 pm

Currently, 10% in alt assets (7% in REITS and 3% in natural resources) and plan on increasing to 15% (10%-REITS and 5% in nat resources). This is in addition to what is in the Total Stock Market Index.

JZinCO · Post by **JZinCO** » Mon May 16, 2016 2:46 pm

Interesting that almost all answers are publicly traded, liquid and paper assets. I would have expected at least real estate to be mentioned more (e.g. rental unit).

I'm curious if anyone holds really alternative assets such as actual land, commercial real estate, guns, diamonds, gold, rare coins, stamps, art, pokemon cards, private equity, private debt, solar panels, solar bonds, hedge funds, etc. If so, a little elaboration on your thought process would be helpful.

Oh, and to add to my list from above, I also have a smidge (~1%) in business inventory.

azanon · Post by **azanon** » Mon May 16, 2016 2:54 pm

JZinCO wrote:I'm curious if anyone holds really alternative assets such as actual land, commercial real estate, guns, diamonds, gold, rare coins, stamps, art, pokemon cards, private equity, private debt, solar panels, solar bonds, hedge funds, etc. If so, a little elaboration on your thought process would be helpful.

Oh, and to add to my list from above, I also have a smidge (~1%) in business inventory.

A couple of folks above thought I was being picky calling REITs, just a stock sector. Heck, even my gold bullion ETF and commodities futures ETF doesn't make JZinCO's cut for alternatives!

Maybe we should clarify whether we are to list alternative investments, or just items that we spent a lot of money on, and hold out of sheer, hopeful speculation

TLC · Post by **TLC** » Mon May 16, 2016 2:57 pm

My current allocation targets:

7% REITs (SCHH)
7% Commodities (USCI)
7% Gold (IAU)

azanon · Post by **azanon** » Mon May 16, 2016 2:58 pm

TLC wrote:My current allocation targets:
7% REITs (SCHH)

7% Commodities (USCI)

7% Gold (IAU)

Awesome, what are the odds? (I use USCI and IAU as well, per above). I don't have the REITs etf though.

Dulocracy · Post by **Dulocracy** » Mon May 16, 2016 2:59 pm

Our goal is 10% REITs. REITs, as mentioned above, act differently than stocks or bonds. Because they act differently, they are a good diversifier for my portfolio. Unlike gold (I am not starting that debate, just giving my logic), they produce income. With Gold, you are speculating on the price, but with REITs, you are buying an asset class that is designed to produce income from the underlying assets.

Why more REITs than what is in the total market? 1) Diversifier that acts differently (as referenced above). 2) Unlike other sectors, a HUGE part of commercial real estate is privately owned in private corporations. This means that the Commercial real estate market is under-represented in a total stock fund.

If our goal is 10%, where do we stand? Around 3%. Why not more? Lately, REITs have been run up in price due to a flight to income with bonds being quite weak in that department. We will buy more in this space when the cost comes back to a more normal range (or the profit increases to match the cost). Yes, this is a form of market timing.

JZinCO · Post by **JZinCO** » Mon May 16, 2016 3:08 pm

azanon wrote:
JZinCO wrote:I'm curious if anyone holds really alternative assets such as actual land, commercial real estate, guns, diamonds, gold, rare coins, stamps, art, pokemon cards, private equity, private debt, solar panels, solar bonds, hedge funds, etc. If so, a little elaboration on your thought process would be helpful.

Oh, and to add to my list from above, I also have a smidge (~1%) in business inventory.
A couple of folks above thought I was being picky calling REITs, just a stock sector. Heck, even my gold bullion ETF and commodities futures ETF doesn't make JZinCO's cut for alternatives!

Let me fix that,
"I'm curious if anyone holds alternative assets other than the common response of public equity in commodity and REIT companies." By really alternative, I meant, an asset not easily obtained through any ol' broker.

I'm not saying financial assets such as REIT equity is not alternative. For example, private equity, Berkshire Hathway Class A shares and mainland Chinese shares closed to foreigners are financial assets, not real assets, but are certainly alternative.

IMHO, I consider public equity in REITs or commodities-based companies alternative because, more so that other sectors, the financial assets depend greatly on the underlying real assets. So from the viewpoint of the investor, they are considerably different than buying shares of most publicly traded companies, hence alternative (whereas public equity and debt are considered the default).

unclescrooge · Post by **unclescrooge** » Mon May 16, 2016 3:12 pm

6% REITS
3% commodities ETN
2% gold ETF
1% gold miners ETF

...and enough gold coins to get my family out off the country, if the need ever arose.

...and two tiny rental properties I'm the Midwest, in case a massive earthquake ever destroyed California.

...also own solar panels that are connected to the grid, although in case of grid failure these could be diverted to provide off-grid energy.

SpaceCowboy · Post by **SpaceCowboy** » Mon May 16, 2016 3:20 pm

I'm sure I'm not the one here holding QSPIX after the long extensive threads on it. Also hold REITs.
QSPIX - 3%
VNQ - 2.5%
VNQI - 2.5%

JZinCO · Post by **JZinCO** » Mon May 16, 2016 3:25 pm

Another thought:

If Dividend-payers/growers are bought to replace bonds (not advocating the strategy)..Would you consider them alternative? They are certainly held for a different purpose than 'normal' stock in one's portfolio often banking on dividends rather than capital appreciation.

azanon · Post by **azanon** » Mon May 16, 2016 3:25 pm

Dulocracy wrote:Our goal is 10% REITs. REITs, as mentioned above, act differently than stocks or bonds. Because they act differently, they are a good diversifier for my portfolio. Unlike gold (I am not starting that debate, just giving my logic), they produce income. With Gold, you are speculating on the price, but with REITs, you are buying an asset class that is designed to produce income from the underlying assets.

My standard for an asset class is that i want it to either produce income, or simply be able to sell it sometime tomorrow for more than I paid for it today. And with mechanical processes such as just vanilla rebalancing, it's actually not all that hard to buy low and sell high an asset, over and over, wash rinse repeat, if one just adheres to their rebalancing IPS rules. As long as there's up and down volatility, after I purchase an asset class, I'm set! And if said asset also reduces my portfolio volatility on top of that, I like it even more!

I'm not looking for a debate either, rather wanted to outline where our logic differs.

best2u · Post by **best2u** » Mon May 16, 2016 4:03 pm

During the great recession VNQ showed me poorer performance than the total stock market index. I moved away from REITs a couple years ago, and do not have plans to reenter the asset class. I have a position in gold of 3%. Would increase that to 10% under favorable conditions.

209south · Post by **209south** » Mon May 16, 2016 4:08 pm

10% of portfolio in REITs - 5% domestic (US) and 5% international
5% of portfolio in gold coins
2.5% of portfolio in commodities
2.5% of portfolio in high yield
other 80% of portfolio is 55% investment grade debt (total bond + TIPs + small international allocation) and 25% equities (1/2 US and 1/2 international)
I'm comfortable with all, but may eliminate the commodities and high yield to simplify at some point (not the gold...will never sell the gold!)

Church Lady · Post by **Church Lady** » Mon May 16, 2016 4:11 pm

ooops

mispoke in my prior post ....

major asset class --> sector

There's quite a difference.

sharpjm · Post by **sharpjm** » Mon May 16, 2016 4:38 pm

10% TIAA Real Estate
5% special sauce stocks

Day9 · Post by **Day9** » Mon May 16, 2016 4:44 pm

3% Collatoralized Commodity Fund

The best way to use commodity linked investments like Collatoralized Commodity Futures Funds is to add just a splash to a portfolio while also increasing the duration of your bond portfolio.

In isolation it is hard to prove a commodity investment has positive real expected return and they can be quite volatile so if you are considering them you already know to look at an investment as part of a portfolio rather than in a vacuum.

The risk factors of commodities complement duration risk. They basically react oppositely to inflation and deflation. So theoretically you can improve risk adjusted returns by adding a small amount of commodities while simultaneously extending the duration of your bond portfolio.

BogleBoogie · Post by **BogleBoogie** » Mon May 16, 2016 4:45 pm

k66 wrote:
gkaplan wrote:Zero.
Ditto

Ditto the ditto on zero.

Ice-9 · Post by **Ice-9** » Mon May 16, 2016 4:47 pm

Besides whatever REITs are contained in my S&P 500 and extended market index funds, I have a 7% allocation to Vanguard REIT Index Fund.

It's in my Roth along with International Index, which for the last several years has turned out to be convenient because they haven't moved anywhere close to in lockstep. I just send any Roth contributions to whichever my allocation spreadsheet calls for at the moment.

matjen · Post by **matjen** » Mon May 16, 2016 5:19 pm

I have 5% in the AQR Style Premia Alternative Fund Class I QSPIX

matjen · Post by **matjen** » Mon May 16, 2016 6:29 pm

As an AQR/Asness fanboy I should point out that AQR is a major player in the "Alternatives" space.

https://funds.aqr.com/news/aqr-liquid-a ... s-magazine

mmcmonster · Post by **mmcmonster** » Mon May 16, 2016 6:46 pm

I used to have 3-4% in Gold, 5% in REITs, and 5% in a Health Care Sector Fund (VHT).

I've simplified things since the beginning of the year. Not quite a 3 fund portfolio, but closer to it.

Now I have 2.4% in Health Care Sector (I'm not selling any I own, but not investing new money in it) and nothing in Gold or REITs (I sold those a couple months ago and bought more Total Market--VTSAX).

My goal allocations are:
66% S&P 500/Total U.S.
5% International
2% Health Care Sector Fund
27% Bonds

Over time I will increase my Bonds to (Age-15) and lower my S&P500/Total U.S. accordingly. As my percentage of Health Care Sector Fund shrinks (because I'm not buying any more of it) I'll drop it's goal allocation accordingly.

I have my plan and plan to stick to it.

tomd37 · Post by **tomd37** » Mon May 16, 2016 7:47 pm

As an older retiree (79) I have a simple four-fund 40/60 indexed retirement portfolio, as indicated, containing the REIT Index fund and have had it for at least 15 years.

VBILX - Intermediate-Term Bond Index - 58%
VTSAX - Total Stock Market Index - 18%
VTMGX - Developed Markets Index - 12%
VGSLX - REIT Index - 10%

VLCAX - Large Cap Index - 2% (this is a taxable investment account for some currently excess funds)

I consider the REIT Index fund as a cross between stocks and bonds and somewhat of a hedge against inflation.

zaboomafoozarg · Post by **zaboomafoozarg** » Mon May 16, 2016 9:49 pm

10% US small value
5% international small
5% QSPIX style premia
5% US REITs
2.5% international REITs