Held an index fund three years, sold in month 30, missed the point
I wanted the boring version that works, so in 2022 I put 85k into a broad equity REIT index fund inside a taxable account and told myself I'd hold ten years. I sold in the middle of last year at a loss of about 9k, plus I'd collected around 9,800 in distributions along the way, most of which I paid ordinary income rates on because I put it in the wrong account type.
So call it roughly break even on paper and clearly negative after tax, over three years, for an asset class that has returned something like 9 percent annualized over two decades.
Where it went wrong, in order.
The account. Taxable, when I had unused space in a Roth. REIT distributions are mostly nonqualified, so I was paying ordinary rates on the income every year for three years on an asset whose whole appeal is the income. I knew this was suboptimal and told myself the difference was small. On roughly 9,800 of distributions it was not small.
The timing story I told myself. I bought partly because rates were rising and I'd read that REITs were cheap. They got cheaper. Then they stayed cheap. That's the thing I hadn't priced in, that a valuation gap can stay open for years. The gap between REIT valuations and broader equities got about as wide as it's been outside the financial crisis and the early pandemic, and my reaction was not patience.
The sale itself. Nothing happened. No emergency, no better idea. I'd been watching the AI names run for eighteen months while my position did nothing, and I decided I was in the wrong place. That was the entire analysis. I moved most of it to a total market fund.
What I'd do differently: use the tax-advantaged space first, and write down in advance what would make me sell. If I'd had a sentence saying "sell if occupancy and same store NOI deteriorate across sectors" I'd still hold it, because they didn't. Fundamentals were fine the whole time. I sold on relative price.