REITS

[frugal]

Hi,

Do you have VP?

Can I know your opinion about Reits?

Can it work well as VARIABLE portfolio?

Regards

[boglerdude]

I trust the mob of investors to price things close enough. ie I hold market weight

Own your home, and if you still have to tinker with something get a rental and fix it up. Add value. you'll be overweight real estate and inflation protection and can hold less 0-real-return gold

Lots of reit discussion on bogleheads also

[whatchamacallit]

Here is a good European voice on not overweighting as well.

Lars Kroijer
https://youtube.com/playlist?list=PLXy7 ... ure=shared


So like bogglerdude said, You already own Reits in a stock fund so no reason to overweight them.

[vnatale]

I made an initial investment in the Vanguard Index REIT fund in January 2003 and it has remained untouched, other than collecting dividends.

[boglerdude]

There were a couple posts claiming FAANG is overvalued and capweight indexes are "distorted"

Maybe, but bubbles can last years. Meanwhile every day youre using headspace debating when to get out then back in. Titling wont have much impact either way provided you dont keep trading based on public news narratives

edit1: and you avoid taxes and fees

[frugal]

Hi

I mean buy and hold Reits every year.

No?

[boglerdude]

Go ahead m8 buy some REITs if you like the narrative. Maybe where you dont live, to diversify.

Randomly leaving this here, Levine on Dalio https://www.bloomberg.com/opinion/artic ... ity-issues

[boglerdude]

Excerpt if paywalled

You could imagine three phases in the life of a wildly successful billionaire hedge fund manager. In Phase 1, before you become a wildly successful billionaire, you will have access to more or less accurate facts about the world. ​You’ll be motivated to find out true facts, because you are still trying to become successful, and you will succeed or fail based on your ability to understand the world correctly. If you make a mistake, you will lose money, and nobody will sugarcoat it or tell you that you are a hidden genius. Of course it is hard, for anyone, to find out true facts and understand the world correctly, and you might not make it. But if you do become a wildly successful billionaire hedge fund manager, it’s because you were good at it, because you had an unusual skill for finding out and understanding the truth.

In Phase 2, after you become a wildly successful billionaire, your access to information will change, in some good ways (you can call people and ask them questions and they will answer) but also in some bad ways (the people around you will have a tendency to tell you what you want to hear). “I think we should buy soybean futures,” you will say, and your subordinates will say “great idea boss” because you have a lot of money and they hope you will pay them some of it. The combination of your money and your past success will make everyone defer to you in ways that make you worse at your job; you will not get the spirited pushback and frank debate and negative feedback that you got in your scrappier anonymous days.

But you got to where you are by being good at finding out true facts about the world, and this is an extremely well-known problem, so you will compensate for it. You will hire people who are not cowed by you, who will tell you the truth and push back on bad ideas. You will encourage your subordinates to be honest with you; you will reward them for principled disagreement; you will seek out contrary views and negative feedback; you will be comfortable with discomfort.

In Phase 3, after you have been a wildly successful billionaire for a while, that will stop being fun? Like:

If people constantly push back on you, and if your ideas are constantly tested by reality, that will keep you sharper and allow you to make more money for longer, but it’s hard work.
If people constantly tell you that you’re great, you will lose your edge, but you will spend your days coddled and happy and surrounded by praise.
At some point you won’t need to make more money. You will have less need to be right, and more need to be told that you are right. You will get more comfortable with comfort.

But you are, still, the person who got to where you are by being good at finding out true facts about the world. So you might keep in place the trappings of Phase 2. You will keep telling people “no, I mean it, be ruthlessly honest with me, if my ideas are bad you have to tell me.” They will just understand that you mean something different. “Boss, you know me, and you know that I am ruthlessly honest with you and would push back if your ideas were bad,” they will say. “So you can believe me when I say: This is the best idea I have ever heard in my career.” And then you give them a $50 million bonus and they are happy and you are happy and it just doesn’t matter that much if your idea was, in fact, bad. Maybe you’ll lose money! But you have plenty of money. Why not trade some of it for praise?

I do not think this is particularly scientific or anything. But it is striking to me that:

Pretty much every large investing firm talks, to some degree, about being a meritocracy of ideas, in which people push to find the truth without deference to rank. Because you kind of can’t do the job any other way!
Bridgewater Associates, the world’s largest hedge fund, talks about it vastly more than all the others, and in weirder ways, with complex scorecards and iPad apps to rank employees’ contributions, with a culture of “radical transparency,” with a carefully cultivated list of management principles. And Ray Dalio, Bridgewater’s founder, has published a book of those principles (called Principles), and does a ton of media about how committed he is to radical transparency and also mentoring Diddy.
One way to understand this is that, much more than his peer hedge fund luminaries, Dalio really is committed to seeking out honest feedback, and given his success he has had to build a complex and enormous system to solicit it. Another way to understand it is that he’s not, and he has built that complex and enormous system to feel better about himself.

Rob Copeland’s book about Bridgewater, The Fund, is out today, and oh man does it have a point of view! Copeland’s thesis is essentially that the “radical transparency” stuff is fake and Bridgewater is a pure cult of personality around Dalio, that all of the scorecards and iPad apps were just overcomplicated ways to measure who agreed with Dalio the most. (They have been scaled back a bit since Dalio stepped down.) In the introduction, Copeland tells the story of Paul McDowell, who built a Bridgewater app for ranking employee “believability”:

He asked top employees to rank one another on the notion of who was most trusted to make decisions in a given subject matter, starting from the top. The system began to work a bit dynamically. If a slew of Bridgewater executives gave an underling overall positive believability ratings, the subordinate’s own opinion would begin to carry more weight. McDowell began to see how believability could be a way to identify talent across the hedge fund.

But Dalio objected:

One of his subordinates had just flagged for him a suspicious finding: two people inside Bridgewater — one in investment research, the other a lowly information technology grunt — had higher believability scores than Dalio himself. People were beginning to whisper about it.

McDowell explained to Dalio that this was a sign the system was working, that Bridgewater was fishing out pockets of talent in its ranks — exactly as Dalio had asked him to do.

Dalio’s voice made no secret of his irritation. Why doesn’t believability cascade from me?

And so McDowell “assigned an underling to go into the software and program a new rule”[1]:

Dalio himself would be the new baseline for believability in virtually all important categories. As the original, top-most believable person at Bridgewater, Dalio’s rating was now numerically bulletproof to negative feedback.

The book is full of stuff like this: Dalio would call a big meeting, some underling would say something to the effect of “buddy this is a cult and the Principles are nonsense,” Dalio would turn to other underlings and say “do you agree,” the other underlings would say “oh no boss definitely not” in unison, and the objector would get shamed and fired. (One of these stories is excerpted in New York magazine today. And Vanity Fair has an excerpt about some of Bridgewater’s show trials, conducted by James Comey.) A system of radical transparency in the service of making the boss feel good.

Copeland also reports that this applied to investing decisions. From an excerpt that ran in the New York Times this weekend:

With the hope of turning around the firm’s investment performance, members of the Circle of Trust put together a study of Mr. Dalio’s trades. They trawled deep into the Bridgewater archives for a history of Mr. Dalio’s individual investment ideas. The team ran the numbers once, then again, and again. The data had to be perfect. Then they sat down with Mr. Dalio, according to current and former employees who were present. (Lawyers for Mr. Dalio and Bridgewater said that no study was commissioned of Mr. Dalio’s trades and that no meeting took place to discuss them.)

One young employee, hands shaking, handed over the results: The study showed that Mr. Dalio had been wrong as much as he had been right.

Trading on his ideas lately was often akin to a coin flip.

The group sat quietly, nervously waiting for the Bridgewater founder’s response.

Mr. Dalio picked up the piece of paper, crumpled it into a ball and tossed it.

I have written before about my “stylized model for thinking about Bridgewater,” which is “that it is run by the computer with absolute logic and efficiency; in this model, the computer's main problem is keeping the 1,500 human employees busy so that they don't interfere with its perfect rationality.” This is not Copeland’s view — there is human discretion involved, and no perfectly rational computer — but there sure are a lot of distractions. Very little of the book is about Bridgewater’s investing; almost all of it is about Bridgewater’s personnel infighting. I am not sure if that is a flaw of the book, or of Bridgewater.[2]

Dalio disagrees with all of this, and wrote on LinkedIn:

The book should be taken for what it is, which is another one of those sensational and inaccurate tabloid books written to sell books to people who like gossip. …

Bridgewater obviously is not and was not as he describes it. If it were, it wouldn’t have had so many happy employees who have stayed so long (about one-third have been there for over 10 years) and it wouldn’t have such great client loyalty and longevity (the average client has been with Bridgewater for 12 years). So this book is more a sign of the times when bad journalism is more a fiction than a source of truth.

I guess the two things I would say are:

I am a person who likes gossip, and I liked the gossip here.
If I were in Dalio’s position, I would probably devote my time to creating complex pseudo-scientific systems to encourage my employees to praise me. It sounds nice!

[vnatale]

Long. But well worth reading.

Thanks!