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What do you use for diversifiers to the typical large cap, large Int'l, intermediate bonds-type portfolio? I see some investors use REITs, preferreds, global bonds, etc. I have a little bit of cash on the sideline and I'm looking for true diversifiers to the typical portfolio components.
I haven't invested in it yet, but I'm rather drawn to PRAFX, TRP's real assets fund. Almost half the fund is real estate, the rest is materials, commodities and energy. It could serve nicely as an all-in-one diversifier for maybe 5% of a portfolio.
One important consideration about putting 5% of your portfolio into such a fund, or into REITs or preferreds, etc, is you must be willing to make a long-term allocation. Moving in and out of these areas is surefire way to lose money.
@soaring, where/how do you buy it? M* lists $5M min. Appears unable to be bought at Fido and ML.
Bought QSPIX earlier this year (as recent as end of August) in 401k/403b accounts at Fidelity via their BrokerageLink. It was available for $500 minimum ($2,500 minimum in IRA), but the institutional class is no longer available for retail investors. QSPIX is now an advisor fund. I noticed this when my monthly contribution failed in September. They let me hold onto QSPIX, but I can't add to it. Class N QSPNX (1.75% ER - 0.25% higher than I) is still available at Fidelity $2,500 minimum NTF in tax deferred accounts. The stated minimum is enforced in a taxable account which is not suitable for this fund.
Other than the usual suspects, mostly individual REITs in the non-taxable account.
Having said that...I did find something which occurred a few years ago in my taxable account...in 2011. All of my funds with the exception of VGHCX all lost money. But my entire income sleeve of individual dividend paying stocks had a 11% gain. So while most folks wouldn't consider that subset of stocks to be diversifiers, I do. It may have been just a weird alignment of stars, but it did happen.
I use etfs in reits and consumer staples, utility funds, a bit of small cap intl to balance out the core funds and stocks in portfolio. On occasion they can all go down in sync, but most of the time when my domestic large cap and international are sinking, these are the ballist that helps to keep my ship afloat:) My biggest surprise this year is that my best ytd fund is the small cap intl and a couple of stocks.
Anyone use preferreds? They seem to be less volatile than REITs.
Yes, I'm new to preferreds, but owned PPSAX (lw at Fido) in 2014-early 2015 and now have a stake in a preferred cef. Good income, not all that volatile, but all the preferred funds I've looked at are at a high price to par now. They seem to do well about every other year and lag some in the off years, and they did great in 2014. Most of the funds I've considered are hybrids, with some straight corporate debt, so they act more like bonds than a REIT fund would. Make sure you check the credit exposure if you go shopping; the credit quality varies quite a bit.
The etf PFF is a quick & easy way to get exposure, but I "prefer" active management in preferreds.
As I learn more about Roth IRAs I believe there may be diversifying potential with a Roth REIT IRA. Custodians for Roth REITS are hard to come by for small investors, but owning individual properties that are bought (hopefully at a discount), manage (throwing off a rental income stream) and then sold (hopefully at a profit) can provide a different risk profile compared to even owning REITS associated to the stock market (individual shares, etfs or mutual funds).
Comments
One important consideration about putting 5% of your portfolio into such a fund, or into REITs or preferreds, etc, is you must be willing to make a long-term allocation. Moving in and out of these areas is surefire way to lose money.
TIAA Real Estate Account - Direct ownership interests in commercial real estate - 13% of portfolio
So, no one REALLY wants to own them.
Just kidding. Ignore us cynics! Carry on.
Thanks. What a change to make. Thanks also for class N info; I missed that.
@willmatt72,
Sure: FREAX and VNQI.
Other than the usual suspects, mostly individual REITs in the non-taxable account.
Having said that...I did find something which occurred a few years ago in my taxable account...in 2011. All of my funds with the exception of VGHCX all lost money. But my entire income sleeve of individual dividend paying stocks had a 11% gain. So while most folks wouldn't consider that subset of stocks to be diversifiers, I do. It may have been just a weird alignment of stars, but it did happen.
Totally forget the steadiest of them, FRIFX. Sorry.
I have a substantial slug in it.
The etf PFF is a quick & easy way to get exposure, but I "prefer" active management in preferreds.
Even holding traditional REITS in a Roth IRA might make sense for a different reason talked about here in this thread:
reits-are-a-'free-lunch'-to-roth-ira-investors