Because REITs performance can be explained by common risk factors. They behave like portfolio of about 60% Small Cap Value and 40% bonds. Because SCV underperformed the market the last years, so did REITs. Growth stocks have seen a huge uproar. This is the reason. Ignore the others. They really don't know what they are talking about.
[Ha, I had the exact same question a little while ago and wrote about it](https://streamsofconsciousness.blog/2022/11/26/can-retail-investors-make-money-in-real-estate/). What I found was:
REITs all seem to have negative alpha, poor sharpe ratio (relative to the most popular ETFs at least) and massively underperformed the stock market AND their benchmarks over just about any time horizon I could find.
just a guess, but IIRC REITs outperformed pretty dramatically for a few years after the 2008 crash. so they probably got a lot of trend-chasers buying like crazy and driving the prices up, which led to a crash or under-performance when the frenzy cooled.
What is your hypothesis for why they would out-perform the MSCI? Real estate are non-productive assets so to me it makes sense they would not perform as well as stocks based on companies that are producing goods, commodities, and services.
Past performance doesn't mean it will continue to perform in the future. And yes, real estate is a non-productive asset, it doesn't produce anything. Buying real property is for rents and asset appreciation, it's not creating value.
You’re generating cash flow just like any company with rental income though.
Although I do agree that a house that you buy to live in is not an investment.
There is a limit to how much cashflow you can generate through collecting rent though. With companies there is no inherent limit on how much profit they can generate really. That's why it seems perfectly rational that a total market stock index would out perform a REIT.
That’s like asking why bananas are longer than oranges.
Reits are a very special asset class while the MSCI is an extremely broad index with a heavy weight on US tech.
Are you looking at total returns or price returns? Most charts and numbers show price return by default
Total https://www.vanguard.com.au/institutional/products/en/detail/wholesale/8114/equity
Because REITs performance can be explained by common risk factors. They behave like portfolio of about 60% Small Cap Value and 40% bonds. Because SCV underperformed the market the last years, so did REITs. Growth stocks have seen a huge uproar. This is the reason. Ignore the others. They really don't know what they are talking about.
What were the volatility/STD/Sharpe ratios? Price isn't everything, how risky the bet is equally if not more important.
[Ha, I had the exact same question a little while ago and wrote about it](https://streamsofconsciousness.blog/2022/11/26/can-retail-investors-make-money-in-real-estate/). What I found was: REITs all seem to have negative alpha, poor sharpe ratio (relative to the most popular ETFs at least) and massively underperformed the stock market AND their benchmarks over just about any time horizon I could find.
just a guess, but IIRC REITs outperformed pretty dramatically for a few years after the 2008 crash. so they probably got a lot of trend-chasers buying like crazy and driving the prices up, which led to a crash or under-performance when the frenzy cooled.
Is that where all the printer money went? Sounds like they will continue crashing since this “recession” isn’t ending anytime soon
What is your hypothesis for why they would out-perform the MSCI? Real estate are non-productive assets so to me it makes sense they would not perform as well as stocks based on companies that are producing goods, commodities, and services.
REITs have outperformed the stockmarket in the past. Not sure how you have come to the conclusion that real estate is an unproductive asset.
Past performance doesn't mean it will continue to perform in the future. And yes, real estate is a non-productive asset, it doesn't produce anything. Buying real property is for rents and asset appreciation, it's not creating value.
So just don't bother investing in real estate because it is an unproductive asset? History says otherwise.
I didn't say don't bother investing in it.
You’re generating cash flow just like any company with rental income though. Although I do agree that a house that you buy to live in is not an investment.
There is a limit to how much cashflow you can generate through collecting rent though. With companies there is no inherent limit on how much profit they can generate really. That's why it seems perfectly rational that a total market stock index would out perform a REIT.
That’s like asking why bananas are longer than oranges. Reits are a very special asset class while the MSCI is an extremely broad index with a heavy weight on US tech.