- If you want to add more “oomph” to your portfolio along the way, you need to also consider SWAN-a-Bees.
- By carefully examining historical, current, and future trends, investors can design REIT portfolios that generate favorable risk-adjusted returns.
- “Long-term investors should be looking at REITs with dividends that are not just safe but also have good growth prospects.” Ralph Block.
- Looking for a portfolio of ideas like this one? Members of iREIT on Alpha get exclusive access to our model portfolio. Get started today »
On Dec. 30 – the second-to-last day of the year and the decade – I published an article on the free side of Seeking Alpha called “The Top 10 REIT SWANs for 2020.” Here’s how it began:
“As most investors recognize, high-quality REITs, also referred to as SWANs, can expect to have good access to capital during most market cycles. In addition, these best-in-breed companies are able to thrive through these cycles because of their superior competitive advantages.
“We seek out the best opportunities by always insisting on quality and value. Because of our long-term focus, we have been able to deliver superior results by analyzing underlying cash flows that support sound dividend growth practices.
“As David Swensen with Yale Investments explains, ‘People should stop chasing performance and just put together a sensible portfolio regardless of the ups and downs of the market.’”
That's such an important and powerful statement that even the smartest among us forget far too often. Performance is important, of course. Please don’t think otherwise.
We need to be focusing on whether a company is progressing, staying steady, or falling apart. We need to be looking at their facts and figures and forward-looking statements.
What we don’t need to do, however, is chase everything that runs by us. That’s a great way to lose big and lose fast.
Can You Ever Have Too Many SWANs?
That’s why SWANs are so great. These sleep well at night stocks do grow. That shows very, very well in our SWAN-centric Durable Income Portfolio – which has delivered reliable REIT performance since its inception in August 2013.
We’re talking about average returns of 20.5% per year. Hardly anything to sneeze at. Which is why we’re not.
Sneezing, I mean. We are, however, buying into SWANs. Because why wouldn’t we?
These stocks are great!
Of course, this begs the question of why I don’t recommend filling up on only SWANs. It’s a reasonable thought to ponder, I’ll grant you. All the same, a proper portfolio that can stand the test of time should be much more diversified than that.
It should hold:
- Stocks and bonds
- National and international investments
- REITs and “regular” stocks
- Big-cap and small-cap stocks.
- What portion of each you should have should be up to you and your financial advisers. But, overall, the point of having all those positions is to balance out the markets’ often unpredictable fluctuations.
When one group bobs, another can weave. When one category falls, another can rise.
For instance, the Dow Jones Industrial Average – which tracks 30 large-cap companies – rose about 92% since August 2013.
The smaller-cap oriented S&P 500, meanwhile, rose more than 97%, with certain individual stocks on it performing substantially better than that. Then again, certain individual stocks on it performed substantially worse.
That’s the nature of small-cap stocks. They can take your portfolio to new heights, it’s true. But they’re also inherently riskier. That’s why they’re typically cheaper to buy. Their lower price points are there to incentivize you to buy them anyway.
It’s a give and take, as with everything else in life.
In short, no single category is perfect on its own in every environmental condition or sentiment. It’s only together that they can truly work well.
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