Balancing your strategic asset allocation with US REITs

A core US REIT allocation to improve long-term risk-adjusted returns

Time to read: 3 min  

The basis of asset allocation is to combine asset classes that have low performance correlations, with the goal of optimizing the risk-return profile of the overall portfolio. A traditional strategic asset mix includes allocations to both stocks and bonds — but less often do we see a targeted allocation to US real estate investment trusts (REITs) in that mix for individual investor portfolios.

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Expert outlooks reinforce the case for alternatives

With market stress and volatility in the forecast, alternatives may help provide needed diversification

Time to read: 3 min

For almost a decade, we have witnessed a historic bull market characterized by high equity returns, low volatility and low interest rates. In my opinion, it seemed like most investors believed all that was needed to be successful was to pile into equities and not worry about diversification (or anything else, for that matter). Frequent readers of my blogs know I have been cautioning investors to prepare for lower equity returns, increased volatility and rising interest rates. I’d like to share three recent news stories that share a similar view of the markets. Given the increasing prevalence of this view, investors may wish to consider alternative investments.

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‘Tis the season for diversification

Equity markets send a timely reminder about diversifying into alternatives

Time to read: 3 min

This fall has been a challenging season for equities. In October, the S&P 500 Index declined approximately 9%,1 while volatility, as represented by the VIX Index, more than doubled.1 And November hasn’t been much better, with some stock indexes approaching double-digit losses for the year as we enter December.2 This behavior serves as yet another reminder that equity markets are often volatile and can go down just as easily as they can go up. Given this recent and vivid demonstration, I believe investors (and their portfolios) should consider the potential benefits of allocating to alternatives.

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Are you getting enough diversification from your alternatives allocation?

Our research shows that most portfolios aren’t maximizing the diversification potential of alternatives

Time to read: 4 min

Alternative investments have been used by some investors to diversify their holdings, and these may potentially help reduce overall portfolio risk when the appropriate strategies are implemented properly. Over the past year, the Invesco Global Solutions team examined hundreds of financial advisor portfolios, and we discovered that a common source of hidden risk is unintended equity exposure within alternative allocations, which can have an adverse effect on portfolio performance during equity market downturns. Fortunately, there are solutions that can potentially mitigate this risk and help investors achieve desired results.

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A preferred approach to US REIT investments

Making the case for US REIT preferred stock in flexible real estate portfolios

Time to read: 5 min

When investors seek to take advantage of publicly listed real estate opportunities, they often favor traditional REIT common stock to gain exposure. This makes sense — from Oct. 1, 2008 through Sept. 30, 2018, US REIT common stock has provided attractive returns coupled with income generation, potential diversification benefits and a potential hedge against inflation.1 However, we believe US REIT preferred stock may offer a unique opportunity for investors to access real estate-like returns with even higher income (and lower volatility) versus traditional REIT common stock.

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