Q: My question regards REIT funds. I’d like to diversify my portfolio to include some real estate. You recommend in your books to open this asset class as an IRA (traditional or Roth). However, for my case this may not work. I am a US citizen living and working overseas. My income falls below the Foreign Earned Income Exclusion amount, and so I am unable to open/contribute to an IRA in the US. So, if I diversify into an REIT fund, I will have to accept the higher tax burden that comes with these accounts. My question is: do you think that it is worth it, in the long run? (I plan on working overseas for the next 4-5 years at least) Or should I skip on diversifying into real estate until I am able to do so in an IRA? Would an REIT ETF fund be a better move over an REIT mutual fund?
A: The long term return and risk of REITs are very similar to the returns and risk of value stocks. My suggestion is you put the REIT money into a split of small cap and large cap U.S. value funds. When you are back in the U.S. you can start making IRA investments in REITs. Thanks for your kind comments about my books. I hope you will encourage others to read them. I would also be grateful if you would review them at Amazon.