How many REIT tickers is too many for 22k?

I have 22k that came out of a car I didn't end up replacing. I want it in real estate exposure without becoming a landlord this year, so public REITs are where I landed.

What I have so far: a list of 11 tickers across industrial, data centers, senior housing, one grocery-anchored retail name, and two diversified ones. My spreadsheet has price, dividend yield, and the sector for each. That's it. No debt figures, no payout ratios, nothing about how they fund acquisitions.

What I'm unsure about is the count. Eleven names on 22k is about 2k a position, and I can't tell if that's diversification or just noise I'll never track. I've read the argument that a broad REIT index fund does the same thing with one line item, and I've read the argument that the whole point right now is tilting toward sectors with tightening supply, which an index fund won't do for you.

The specific decision: do I buy the index fund and add three or four sector tilts on top, or do I pick five names and hold them properly. I keep switching between those two every couple of days and the money is sitting in cash while I do it.

I also don't know what "hold them properly" means in practice. Do I read quarterly reports? Do I just not look?

3 replies

0paulgrant17PassivePRO5

Eleven positions at 2k each on a 22k account is more names than you'll ever actually follow, and I say that as someone who tried the same thing with a smaller number. I lasted two quarters before I stopped opening the reports.

The part of your list that jumped out at me is that you have price and yield and nothing else. Yield alone will pull you toward whatever is most beaten up, which is not the same as whatever is cheap. If you're going to pick individual names you need at least a look at how much debt sits on them and when it matures, because that's where rate sensitivity actually bites.

2dmitri_v6CapitalPRO6

@wren is right about the maturity schedule. That's the line I'd add to your sheet before anything else, weighted average debt maturity and the share of debt that's floating. Two REITs in the same sector with the same yield can behave completely differently if one has a wall of maturities inside two years.

On your actual decision, I'd frame it differently than five names versus an index plus tilts. The question is what you're going to do when a position drops 20 percent. If you can't answer that for a specific ticker, you don't own a thesis, you own a ticker. An index fund lets you not need an answer. Five names means you need five answers.

Also worth saying, the prospectus and the annual filing for any of these is public and free. If reading one feels like too much work, that's information about which path you should take.

2chriswalton8CC1CPRO8

I'll disagree with the framing a little. The reason people are interested in REIT sector tilts right now is the gap between where public REITs trade and where the equivalent private real estate is valued, which by most accounts is the widest stretch since the early 2000s. If you buy the broad index you get the whole gap, including office, which is still split between decent buildings and buildings nobody wants.

So the tilt has a point. But a tilt is three or four percentage points of weight over the index, not eleven equal-weight bets. Buy the fund, add two sector names you can actually explain to someone, and let the cash stop sitting.

How many REIT tickers is too many for 22k?

3 replies