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

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neomutiny06
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What % do you have in alternatives? REITs, commodities, etc.)

Post by neomutiny06 »

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?
Last edited by neomutiny06 on Mon May 16, 2016 8:19 am, edited 1 time in total.
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midareff
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Re: What % do you have in alternatives? (REITs, sector funds, etc.)

Post by midareff »

Is small value a sector? High yield?
livesoft
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Re: What % do you have in alternatives? (REITs, sector funds, etc.)

Post by livesoft »

We have about 8% of the total portfolio value in the TIAA Real Estate account. A thread on this fund: viewtopic.php?t=123075
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azanon
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Re: What % do you have in alternatives? (REITs, sector funds, etc.)

Post by azanon »

I thought REITs and sector funds are just stocks. Am I missing something? :o
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neomutiny06
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Re: What % do you have in alternatives? REITS, commodities, etc.)

Post by neomutiny06 »

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
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Re: What % do you have in alternatives? (REITs, sector funds, etc.)

Post by staythecourse »

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

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

Post by bertilak »

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

Post by jhfenton »

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

Post by riptide »

10 % in Reits
10% in Small Cap value
Brokerage account 70/30 | VG total Market 35% | VG total Intl 10% | VG small cap value 13% | VG Reit index 10% | VG Total Bond 30% | TSP Account 75/25 | C Fund 55%, S 20%, F 12% , G 13% | EE Bonds=Emergency Fund
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Re: What % do you have in alternatives? REITs, commodities, etc.)

Post by DetroitRick »

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

Post by bigred77 »

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

Post by gkaplan »

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

Post by KyleAAA »

10% in REITs.

I also small/value tilt, but I'm assuming that's not what you meant.
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Re: What % do you have in alternatives? REITs, commodities, etc.)

Post by Church Lady »

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.
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Re: What % do you have in alternatives? (REITs, sector funds, etc.)

Post by azanon »

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

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

Post by heyyou »

10% Sm Value, 10% EM, 10% REITs, spent 10% on PCRIX a decade ago
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Re: What % do you have in alternatives? REITs, commodities, etc.)

Post by TheTimeLord »

2% in MLPs. Bought them a back in 2008 and sitting on some gains. Probably should have sold back last August.
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ruralavalon
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Re: What % do you have in alternatives? (REITs, sector funds, etc.)

Post by ruralavalon »

azanon wrote:I thought REITs and sector funds are just stocks. Am I missing something? :o
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.
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Re: What % do you have in alternatives? REITs, commodities, etc.)

Post by asif408 »

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

Post by JZinCO »

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

Post by SpringMan »

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

Post by k66 »

gkaplan wrote:Zero.
Ditto
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Re: What % do you have in alternatives? (REITs, sector funds, etc.)

Post by azanon »

ruralavalon wrote:
azanon wrote:I thought REITs and sector funds are just stocks. Am I missing something? :o
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
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Re: What % do you have in alternatives? REITs, commodities, etc.)

Post by krannerd »

4% in REITs and 3% in commodities as part of a target date retirement fund.
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Re: What % do you have in alternatives? REITs, commodities, etc.)

Post by inittowinit »

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

The rest is VTSAX and VTIAX.
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Re: What % do you have in alternatives? REITs, commodities, etc.)

Post by Elsebet »

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

Post by Leeraar »

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.
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topper1296
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Re: What % do you have in alternatives? REITs, commodities, etc.)

Post by topper1296 »

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

Post by JZinCO »

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

Post by azanon »

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! :oops:

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 :mrgreen:
Last edited by azanon on Mon May 16, 2016 2:58 pm, edited 1 time in total.
TLC
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Re: What % do you have in alternatives? REITs, commodities, etc.)

Post by TLC »

My current allocation targets:
  • 7% REITs (SCHH)
  • 7% Commodities (USCI)
  • 7% Gold (IAU)
azanon
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Re: What % do you have in alternatives? REITs, commodities, etc.)

Post by azanon »

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

Post by Dulocracy »

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

Post by JZinCO »

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! :oops:
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).
Last edited by JZinCO on Mon May 16, 2016 3:17 pm, edited 5 times in total.
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unclescrooge
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Re: What % do you have in alternatives? REITs, commodities, etc.)

Post by unclescrooge »

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.
Last edited by unclescrooge on Mon May 16, 2016 3:20 pm, edited 1 time in total.
SpaceCowboy
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Re: What % do you have in alternatives? REITs, commodities, etc.)

Post by SpaceCowboy »

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

Post by JZinCO »

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.
Last edited by JZinCO on Mon May 16, 2016 3:25 pm, edited 1 time in total.
azanon
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Re: What % do you have in alternatives? REITs, commodities, etc.)

Post by azanon »

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

Post by best2u »

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

Post by 209south »

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

Post by Church Lady »

ooops :oops: :oops: :oops: mispoke in my prior post ....

major asset class --> sector

There's quite a difference.
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sharpjm
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Re: What % do you have in alternatives? REITs, commodities, etc.)

Post by sharpjm »

10% TIAA Real Estate
5% special sauce stocks
Day9
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Re: What % do you have in alternatives? REITs, commodities, etc.)

Post by Day9 »

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

Post by BogleBoogie »

k66 wrote:
gkaplan wrote:Zero.
Ditto
Ditto the ditto on zero.
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Ice-9
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Re: What % do you have in alternatives? REITs, commodities, etc.)

Post by Ice-9 »

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

Post by matjen »

I have 5% in the AQR Style Premia Alternative Fund Class I QSPIX
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matjen
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Re: What % do you have in alternatives? REITs, commodities, etc.)

Post by matjen »

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

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

Post by mmcmonster »

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

Post by tomd37 »

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.
Tom D.
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zaboomafoozarg
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Re: What % do you have in alternatives? REITs, commodities, etc.)

Post by zaboomafoozarg »

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