REITs

[Joe45]

I hold a global REIT tracker fund which constitutes around 8% of my portfolio. The balance is in equities and bonds. In early 2020 I concluded that a REIT tracker provides little diversification value, and furthermore, I wasn't keen on the real estate sector, so I decided to sell.

Before I could do so, the Coronavirus crash hit us and my REIT fund was hit badly. It remains 10% below what I bought it for.

I feel I should sell because my original misgivings about the sector haven't changed (they have actually increased). On the other hand, I don't like to sell at a loss and I am conscious of mean reversion over time. Accordingly, I am torn.

My current plan is to hold for another 8 months until the end of the tax year and then sell half of my holding.

Grateful for thoughts.

[Itsallaguess]

I feel I should sell because my original misgivings about the [REIT] sector haven't changed (they have actually increased).

On the other hand, I don't like to sell at a loss and I am conscious of mean reversion over time. Accordingly, I am torn.

My current plan is to hold for another 8 months until the end of the tax year and then sell half of my holding.

Grateful for thoughts.

You've not mentioned where you'd be looking to re-allocate any capital raised from the sale of your REIT fund, but if you've got a good idea as to where that might be, then have you taken a look at the comparable price-performance over a similar COVID-related time-scale?

If your potential new target has been similarly hit with some recent market drops, then you might well be no worse off in reality, or perhaps not in quite as bad a position as you currently think you are, so don't *just* concentrate on the performance of what you might be looking to sell - check the performance of what you might be looking to *buy* too....

Cheers,

Itsallaguess

[dealtn]

Grateful for thoughts.

You are "anchoring", nearly everyone does, it's hard not to. But if you don't like the investment and wouldn't buy it now, you should sell.

[JohnW]

I'd say you're sensible to have a plan to deal with your unwanted REITs, and even more sensible to avoid making changes to your portfolio on the spur of the moment but rather give some time for the dust to settle in your mind before acting.
But make sure your plan is robust if possible, ie, you can stick to it. If REITs are badly down in 8 months and everything else is up, would you still sell?
8% REITs doesn't seem like a hanging crime to me; they are stocks, and might only be 5% or your stocks which many would view as insignifcant in terms of 'wrong' choice. That said, getting rid of them makes sense to avoid unnecessary complexity of your investments without a worthwhile benefit.
I think there's 'research' suggesting private investors get a lower return on their portfolios than they would if the didn't mess with them all the time. True or not, you might want to time your REIT selling to when it's out-performing other assets; that way you're not losing out and you got rid of them. They're stocks, and especially yours being global, can they under-perform as bad as presently for another decade (if they are, I don't know)? Unlikely.

But if you don't like the investment and wouldn't buy it now, you should sell.

I'm not sure that the logic there excludes 'holding', but to be fair she doesn't suggest when you should sell.