It is always worth including property in an investment portfolio. Its volatility is of the lowest and it has the added advantage of dividend income. Although the appreciation in sale price might not be as high as stocks, which have lower capital gains tax, there is the advantage of dividend income. Even when they markets are down they are a hedge against inflation and this would be the best time to buy because prices can only go up.
You can either invest in privately owned property, which could be jointly owned, or publicly traded Real Estate Investment Trusts (REIT's). By it's very nature real estate is very stable because the price can't really vary too much even in the worst of times. REIT's are based on futures and they are traded often the so their price will tend to vary a bit more.
In order to make any sort of analysis you need data from which to follow trends. The index for REIT's, or NAREIT, is determined by the National Association of Real Estate Investment Trusts. Private ownership price averages are tracked using the NPI which is and index created by the NCREIF.
The NPI is only released quarterly because that is as often as the data can be compiled. You can only estimate prices unless the property is sold and that is not done all that often. Most of the time values have to be estimated. The index might not be completely representative of actual fluctuation because of this but real estate does tend to be quite stable. Individual properties could all have very different appreciation and income so returns could vary quite widely from the average.
In a study which analysed the effects of using different combinations over different periods of time it was determined that a combination of direct ownership should be combined with REIT's for the best results. The NCREIF data was manipulated to increase volatility to make it more representative of nature of illiquid assets. His study found that the allocation for property in a portfolio could be as high as 44.5% with a split of 15% REIT's and 30% direct investment.
Results where calculated in increments of 5 years with the longest period being 25 years. Across all these time periods except for 20 years, REIT's on their own where either first, second or third in performance. Private property was the top performer over 5 years and the combination of both created the best results with the lowest possible risk.
Over 15 years REIT's where shown to be three times less volatile than stocks and bonds together. For all but high risk strategies there were always the best returns too. This is the reason that using property in an investment portfolio is always recommended.
You can either invest in privately owned property, which could be jointly owned, or publicly traded Real Estate Investment Trusts (REIT's). By it's very nature real estate is very stable because the price can't really vary too much even in the worst of times. REIT's are based on futures and they are traded often the so their price will tend to vary a bit more.
In order to make any sort of analysis you need data from which to follow trends. The index for REIT's, or NAREIT, is determined by the National Association of Real Estate Investment Trusts. Private ownership price averages are tracked using the NPI which is and index created by the NCREIF.
The NPI is only released quarterly because that is as often as the data can be compiled. You can only estimate prices unless the property is sold and that is not done all that often. Most of the time values have to be estimated. The index might not be completely representative of actual fluctuation because of this but real estate does tend to be quite stable. Individual properties could all have very different appreciation and income so returns could vary quite widely from the average.
In a study which analysed the effects of using different combinations over different periods of time it was determined that a combination of direct ownership should be combined with REIT's for the best results. The NCREIF data was manipulated to increase volatility to make it more representative of nature of illiquid assets. His study found that the allocation for property in a portfolio could be as high as 44.5% with a split of 15% REIT's and 30% direct investment.
Results where calculated in increments of 5 years with the longest period being 25 years. Across all these time periods except for 20 years, REIT's on their own where either first, second or third in performance. Private property was the top performer over 5 years and the combination of both created the best results with the lowest possible risk.
Over 15 years REIT's where shown to be three times less volatile than stocks and bonds together. For all but high risk strategies there were always the best returns too. This is the reason that using property in an investment portfolio is always recommended.
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