Quick Take: Vanguard Core + REIT vs. Vanguard Core - 7/25/16

I recently published the Q2 update for The ETF Monkey Vanguard Core Portfolio.

As my readers may recall, I set up a variant of this portfolio that I called The ETF Monkey Vanguard Core + REIT Portfolio. This idea was based on my personal portfolio, in which I maintain a dedicated allocation to REITs. For those interested, the above-linked article explains the rationale for this, as well as features the fact that I set up this particular variant by removing a rather arbitrary 2.5% weighting from each of the asset classes in the "base" portfolio such that I ended up with an initial weighting of 7.5% for REITs.

A commenter on one of my recent Seeking Alpha articles suggested that REITs are a useful addition to a diversified portfolio. It was this comment that led me to develop this quick update on my own variant of such a portfolio.

Here, then, as of the market close on July 25, 2016, is the cumulative performance of The ETF Monkey Vanguard Core + REIT Portfolio:


For purposes of comparison, here is The ETF Monkey Vanguard Core Portfolio updated as of that same date:



As can quickly be seen, with a rather stunning return of 22.39%, REITs have been a most beneficial addition, with this variant of the portfolio having generated an overall return of 4.11% since inception vs. 2.82% for the "base" portfolio.

But even more then that, the overall volatility of the REIT variant has been less. Here is that variant tracked against the S&P 500 since inception (the blue line is my portfolio, the red line is the S&P 500):


 And here is that same graph for the "base" variant:


As can be seen in this visual comparison, in down markets the REIT variant held up better against the S&P 500 average than did the base variant. So far, the benefits have extended even in the recent rising market.

Now, as an asset class REITs are very sensitive to interest rates. The interest rate environment has proved beneficial over the past year. This could change if rates begin to rise. Still, I agree with the commenter on my Seeking Alpha article. REITs are a very useful asset class to include in your portfolio.

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