Adding REITs to a Portfolio

Q: Why doesn't SMI include REITs in their asset allocation?

A: REITs (and other mutual funds that invest in real estate), can be a useful tool in building a portfolio. In past articles, we've demonstrated that adding a real estate component to a portfolio can reduce volatility (risk) without impacting returns negatively. In fact, prior to 1996, SMI used to include an allocation to precious metals and sector funds in Upgrading. Over the years though, we've realized that simpler is better when it comes to our core strategies. We think carefully about how to optimize the return/simplicity equation. As a result, we've moved investments in REITs and other sector funds into a separate advanced strategy we call "Sector Rotation." Many SMI readers allocate a small portion of their portfolios to this strategy (which has been extremely successful), and follow it via our "Advanced Strategies"  page.

• Is Now a Good Time to Buy REITs?
• Collecting the Rent: Investing in Real Estate Funds 

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