patrick.net

I dollar cost average half of it over the year... and put the balance in in January.

clambo says

Do not try to time the market, it's a waste of time.

Hahah, I have successfully timed the market twice now.

Just dumb luck? SEZ YOU!

More like, not willing to listen to the advice of others blindly.

Vicente says

These days it'd probably be FCSTX, a tax-free bond fund.

I'm not sure, but my guess is you are giving up something on returns in exchange for the tax free part...if it's in an IRA, taxes don't matter anyway. There is probably something better.

swebb says

I'm not sure, but my guess is you are giving up something on returns in exchange for the tax free part...if it's in an IRA, taxes don't matter anyway. There is probably something better.

Very Good observation. In my IRA, I hold 50%+ in REIT's.

*** No federal and state income tax at the entity (Corporation/REIT) level.

*** No federal and state income tax at the shareholder level (IRA account).

Nothing beats that structural advantage as every dollar earned, flows as dividends. The government gets nothing.

SFace says

Very Good observation. In my IRA, I hold 50%+ in REIT's.

*** No federal and state income tax at the entity (Corporation/REIT) level.

*** No federal and state income tax at the shareholder level (IRA account).

Nothing beats that structural advantage as every dollar earned, flows as dividends. The government gets nothing.

An advantage, for sure...but 50%? When you say REITs, are you talking about the AGNC type (debt side), or an entity that actually holds and leases property? (ticker symbols, please :)

The ~20% dividend that AGNC offered did lure me (on and off) for a few years, but I got scared away. That and the fact that I don't understand the business well enough to be able to identify the risks...afraid of losing my shirt. Surprisingly (?) I made as much on the price fluctuations as I did on the dividends.

swebb,

There are about 25 REIT ETF. The biggest and well known ones are Cohen and Steers (GRI), Vanguard (VNQ), First Trust (FRI), and a bunch of ishares (State Street, Barclays now Blackrock funds).

Then there are REIT mutual funds and closed and closed funds. Most 401K that have a reasonable amount of choice have REIT as a choice.

In any case, there's about 180-200 publicly traded REIT's so the funds invest in the same companies anyway and they perform pretty much the same. 10 year performance has been around 10-12% vs 3-4% for the S&P over the last 10 years. Over the last 30 years, REIT has performed about 12% vs. 10% for the S&P. If you just pick about 10-12 of the larger companies in a variety of industries, it is pretty much the index without the fees

Mortgage REIT is a tiny pie in the REIT world as there's about 5 such companies such as AGNC, NY and CIM.

The major REIT's are:

Commercial Office building: Boston Property, (Lot of them are private like Shorenstein, and Trump)
Apartments: Avalon Bay, Archstone
Commercial/Industrial: Prologis
Malls: Simon Property, General Growth Properties
Health Care: HCN,
Other: Public Storage, Vornado Trust.

A mall such as Simon property generate cash flows regardless. They own Ala Moana and GGP owns Ceasars Forum, two of the greatest mall properties in the United States. Most REIT;s generate consistent cash notwithstanding what the value multiples may or their debt scheme. Most of the worlds riches men and women made they fortunes from real estate.

AGNC is actually a very simple business as it is run by a one floor office with about 50(very high paid) employees, Their SG&A for the entire year is only 20M, which is as small as it gets for a public company. Basically, they have about 5B in equity, buys 40B worth of MBS and profit from the spread, around 1.9% according to the SEC filing or about 780M annualized. Subtract that with the miniscule overhead and the rest are dividends. They make more money if the spread widens (say 2% of 40B instead) or they leverage even more (say 1.9%) of 45B instead). The spread is more important since that is a true indicartor of profits whereas leverage is more of a risk scheme. The caveat is the value of the 40B worth of MBS they buy needs to hold up. Some are government backed (low margins) and some are not to get the 1.9% mix. The non-government MBS they hold are likely prime loans such as 15 year fixed. The margin is effected by the default rate which more importantly effects the value of the MBS.

Hope that helps.

SFace says

Hope that helps.

Yes, that helps. Thank you.

i used to dollar-cost average the maximum contribution, but now just dump the max at the beginning of the year.

clark howard says that the first $5K of any investment money should be dumped into a roth ira.

i love when clark answers a call and asks in his nerdy voice, "how are YOU??!"