FORWARD DIVIDENDS

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Monday, January 16, 2017

REITs

I would like to take advantage of the low mortgage rates and buy a home. But, even with supreme effort I have been unable to come up wit the required capital. So, I have been thinking of investing in REIT.



As a staunch believer of vanguard, I have been looking into Vanguard REIT Index Fund (VGSIX). REITs are not strongly correlated with the overall market (correlation stands at 0.74), in a sense it gives me defensive diversification. The yields are also awesome. I believe VGSIX has yield of ~4.8%. This would contribute immensely to my passive income stream. It has a expense ratio of 0.26% which is slightly on the higher side (as compared to other funds in my portfolio). I would keep REITs at 5% of my overall portfolio. I would probably start out with VNQ and once I have 3000 I can switch to VGSIX. BTW, on vanguard ETFs trade for free.

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