Monday, July 10, 2006

Asset Allocation Works

Here's a perfect example of why we like to maintain investments in all asset classes. Here's how various asset classes have performed since May 30:

REITS 6.31%
Crude Oil 2.86%
S&P 500 0.45%
DJIA -0.03
Russell 2000 -0.24
NASDAQ -1.60

The REIT investments in our portfolios have performed quite well over this period and for most clients this has helped their portfolios to recover from the May correction. Without the allocation to REITS, the recovery takes longer.

I find it interesting that REITS are the asset class that is taking the lead right now. With all the talk about a real estate bubble, I think most investors are probably afraid of anything with real estate in the name. Of course, REITS are not really invested in residential real estate so popping the real estate bubble may not have much of an effect on them. REITS are generally invested in things like office buildings (where vacancy rates are quite low), shopping malls (which have done pretty well since consumer spending is holding up) and multi-family housing like apartments (where rents are now rising).

1 comment:

Anonymous said...


REITs work as long as the asset spread is inclined toward the commercial/retail side. My construction clients all agree, no more condos. Tibor Holow of Florida East Coast Realty said it best when overlooking downtown Miami from his office while in a meeting with the designers of his new 85 storey, 'what's missing in this space'.