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Discussion Starter #1
They promise 10% return with low risk investment? too good to be true !!
What are the down side?

Imark
 

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I wouldn't say REITs are low-risk. Some are lower-risk than others, but many of them got severely whacked when the real estate market burst in the US. Anything that can see a 70% drawdown is not low-risk.
 

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I held REI.UN in the '80s before it had that name or a an income trust structure. It was more like a mutual fund. At one point, its value dropped to 50% of my ACB, but I held onto it. As it turns out, it has been an above average investment for me over the past 25 years. However, now I am trimming it from 75% to 10% of my portfolio. I am very pleased with it, but smart asset allocation makes more sense.
 

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Not sure what you mean by promise?

Distributions can be cut at any time. The current yield is no indication of future yield.
 

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Analysts of REITs say that P/E is not a useful measure. With REITs you should look at Price:Funds From Operations (P/FFO).
 

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In stock investing for dummies, they said to not have no more than 10-15% of your portfolio in income trusts.

Interesting question: What is less riskier, REITs or landlording your own rental properties?
 

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I would say definitely REITs are less risky, if you choose well-diversified trusts. Keep in mind that commercial real estate and residential real estate are not always highly correlated.
 

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stupid question on income trust/reits

I'm interested in investing in REITS but not clear on the distribution part..

Some reits have monthly distribution and according to some new release, you have to be in the fund at a specific future date in order to get the distribution.

Does this mean I can purchase the REIT 1-2 days before the stated date and sell it 2-3 days after and still get the distribution? Or is there restrictions on how long you hold the Reit before you can get the distribution?


Thanks - sorry for the stupid question..
 

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hax, you only need to hold an exchange-traded instrument that pays a distribution/dividend for 24 hours. A party utilizing your approach would buy the day before the X-date and would sell on the X-date. He will receive the payout.

but.

there's a problem with this approach. The short explanation is that there's no free lunch in the market. The long explanation is that, notionally speaking, every distribution/dividend paying entity will drop on the X-date by exactly the amount of the payout. So - notionally speaking - you'd be worse off, because dollar-wise you'd be no farther ahead but tax-wise you'd owe income taxes on the distrib/div received.

enuf with the notional. In reality what happens is that market forces sweep in at the start of trading on the X-date and move the stock up or down. Frequently the stock rises despite the payout, and just as frequently it falls farther than the amount of the payout. What you'd really be doing is day-trading the stock on the very day an extra element of volatility is added because of the payout, ie the cards are stacked higher against the small investor. Please think carefully before getting into this.

btw the right way to harvest extra dividends is thru an option strategy. It takes fair amount of knowledge to perform this successfully.
 
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