Asset allocation category for REIT ETF

Hello,

I recently bought some VNQ ETF as I don’t have any “real” real-estate myself and was now wondering if in your asset allocation categories you just put this one under “Stocks” along with others such as VT? or if you would create a new category maybe simply called “Real Estate”?

Cheers!

Hello,

The thing is this ETF is only composed of stocks, not real estate funds or buildings. That means it will be highly correleted to the stock market. American Towers is the 66th biggest position of VT. What’s more a good portion of the buildings in this ETF are industrial/hotel/… real estate. If it was a defensive residential portfolio, not composed of stock, I would definitely consider it as an other asset class. In your case, it’s totally up to you. Would you consider it a different category if it was a technology/food/canadian/music/… ETF ?

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Good point, I would not. So I will simply categorize this ETF under Stocks such as my other ETFs.

I categorize them under real estate. REITs are stocks, but I consider these stocks to be only a vehicle of investment into the real estate underlying (the owned buildings), which gives me a diversified exposure to real estate prices.

I see, thanks for your opinion @ProvidentRetriever. So in your case, if you would also have (or maybe even have) a total world stock such as VT would you also assign some percentage of VT to your real estate category?

To be more precise VT currently has 3.67% in real estate (source: https://www.morningstar.com/etfs/arcx/vt/portfolio) so would you also assign 3.67% of your VT portfolio value to your real estate category? or wouldn’t you bother?

Hi mabi!

Yes, that’s a good idea for even more precision (and update every year or half year based on the report), but I don’t do it because I also have bonds and that overall percentage is small compared to my 5% of real estate. So I assign my REIT ETFs to the 5% of real estate even if I know that it’s actually closer to 6 or 7% of real estate, which is fine.

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