![]() I’ll look for ten of each type, and invest equal amounts in each. Selecting Individual Utilities and Small-cap Value Stocks Using a generic RP portfolio as a kind of chassis, I’ll then compare the basket of individual REITs, the basket of utilities and the basket of small-cap value to see how they fare in terms of compound annual growth rate, standard deviation, and Sharpe ratio. In this one, I’ll choose ten individual utility stocks, and then ten small-cap value stocks from any sector, both following a similar process that I used for selecting individual REITs. This whole process inspired some other questions, though: if individual REITs are better than REIT index funds like VNQ, and also better than utilities index funds like VPU, what about an apples-to-apples comparison of selected utilities stocks to selected REITs? What about a comparison with ten small-cap value stocks, since we've already seen that you can get better results from them compared to REITs? If the move from index funds to the ten individual REITs with lower correlation numbers to stocks made a difference, might a similar process work with utilities and small-cap value?Ĭonsider this a postscript to the six previous posts on REITs. I have taken down the post (which is why it isn’t linked here), and will now start re-writing it with the hope of getting it out soon. ![]() I undersold the upside of individual REITs along the way, so now that summary is off too. The new version is at the link above, and there is a link to the original text at the end.įurthermore, the mistake also has meant that my summary opinion on REITs in the post “Verdict on REITs” needs to be re-thought. Long story short: that piece required a through revision. You see, I had based the whole conclusion of that post on my error. I wish it had just been a cosmetic mistake that I could have fixed in a few minutes, but it went way deeper than that. Alas, that’s me with a bit of egg on my face after I mislabeled two portfolios in my comparison of individual REITs and VPU, the utilities index fund. When we err with how we present those facts, though, we shouldn’t be stubborn in correcting our mistakes. Evidently, six parts wasn't enough in my series on REITs! A question remains - individual REITs appear to be better than a utilities index fund, but that begs the question: are individual utilities better than REITs? What about small-cap value? Here I put three scenarios to the test.įacts are indeed stubborn things, as John Adams says.
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