Add Private REITs to the Bonfire

Don’t fall out of your chair when I tell you that private (or non-traded) REITs make a for a stupid investment.  If you’re paying any attention to my writings, you would already know this.

How would you know?  Simple, as I talk about in my book Backstage Wall Street:

1. Brown’s Law of Brokerage Product Compensation states that the more money a broker or financial salesperson is paid to sell you something, the worse it is for you.  The commissions on non-traded REITs are in the range of 7% versus the $5 trade you could do to buy a public REIT.

2. Opacity is always indicative of information assymetry, and information assymetry always benefits The Street, not the clientele.

3. High-fee funds or vehicles will never match the underlying index by definition – the fees act as a drag in bull markets and add insult to injury in bear markets.

4.  The only self-justification brokers ever had in recommending private REITs was that because they don’t trade and reprice publicly each day, they somehow served to “smooth the volatility” of a client’s portfolio.  Which is Bullshit to the second power (BS²).

Anyway, the data is out on this schlock, from Bruce Kelly at Investment News:

Measured after a sale of assets, a merger or an IPO, nontraded REITs over the past two decades consistently have underperformed the broad market of real estate investing, according to a new study.

Comparing 17 “full-cycle” nontraded real estate investment trusts with two customized benchmarks, the study found that just five such REITs outperformed each of those market indexes. That means 71% of the REITs included in the study underperformed the study’s customized benchmark, in large part due to fees.

Performed by consultant Blue Vault Partners LLC and The University of Texas at Austin McCombs School of Business, the study is likely the first systematic examination of the realized returns for investing in nontraded REITs. Released June 1, it is titled “Nontraded REIT Industry Full-Cycle Performance Study.”

I didn’t need the data, I had my instinct and personal experience.  But the data doesn’t hurt either.  Non-traded REITs are an automatic no for me.

Source:

Most Non-Traded REITs Underperform Market (Investment News)

Don’t have the book yet? It’s a layup Father’s Day gift for dad:

Backstage Wall Street on Amazon

 

 

 

 

 

 

 

 

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers

Please see disclosures here.

What's been said:

Discussions found on the web
  1. video transitions effects download commented on Sep 15

    … [Trackback]

    […] Find More to that Topic: thereformedbroker.com/2012/06/11/add-private-reits-to-the-bonfire/ […]

  2. eatverts commented on Sep 22

    … [Trackback]

    […] There you can find 2198 additional Information on that Topic: thereformedbroker.com/2012/06/11/add-private-reits-to-the-bonfire/ […]

  3. td easyweb online commented on Oct 19

    … [Trackback]

    […] Find More here on that Topic: thereformedbroker.com/2012/06/11/add-private-reits-to-the-bonfire/ […]

  4. british dragon dianabol for sale commented on Oct 22

    … [Trackback]

    […] Here you can find 79895 additional Information to that Topic: thereformedbroker.com/2012/06/11/add-private-reits-to-the-bonfire/ […]

  5. visit our website commented on Jan 05

    … [Trackback]

    […] Read More on that Topic: thereformedbroker.com/2012/06/11/add-private-reits-to-the-bonfire/ […]

  6. human hair wigs commented on Jan 13

    … [Trackback]

    […] Here you will find 90472 additional Info to that Topic: thereformedbroker.com/2012/06/11/add-private-reits-to-the-bonfire/ […]

  7. tangerine sign-in commented on Jan 16

    … [Trackback]

    […] Read More Info here to that Topic: thereformedbroker.com/2012/06/11/add-private-reits-to-the-bonfire/ […]

  8. Panasonic Disk arrays manuals commented on Jan 19

    … [Trackback]

    […] Find More Information here to that Topic: thereformedbroker.com/2012/06/11/add-private-reits-to-the-bonfire/ […]

  9. lace front wigs commented on Jan 20

    … [Trackback]

    […] Read More Info here to that Topic: thereformedbroker.com/2012/06/11/add-private-reits-to-the-bonfire/ […]

  10. DevOps companies in usa commented on Feb 05

    … [Trackback]

    […] Info on that Topic: thereformedbroker.com/2012/06/11/add-private-reits-to-the-bonfire/ […]