REIT Investing Challenge - August 2019 Report

REIT Investing Challenge - August 2019

I have been doing the REIT Investing Challenge since November 10th, 2018.

A little background if you stumbled upon this Challenge Report. I started these challenges in 2018 as a way to show everyday people how investing and saving for your future is as easy as putting a little money aside and growing it using investment securities. As I developed these challenges, I wanted the amount that was saved to be affordable to anybody who was reading these reports. In the REIT Investing Challenge, I commit $100 per month to a Real Estate Investment Trust. The goal is to keep it there for as long as it takes (30 + years long). This isn’t my retirement plan, but in order for readers to actually see it work, I have to make this longer than just 5 or 6 years. So as long as blogs and websites are still a thing 30 years from now, I’ll keep reporting on it month by month.

Results

As of 8/15/2019 dividend date (investments are usually made on the 10th and dividends are paid on the 15th):

Investment Month Number: 10
Amount Invested Each Month: $100.00
Investment: Real Estate Investment Trust
Total Amount Invested: $1,000.00*
Total Account Value: $1,060.28
Total Expected Value: $1,026.66 (See below for calculation)
Total Annual Interest Rate Return: 15.53% (See below for calculation)

*Dividend reinvestment are not considered towards the total amount invested. Only actual cash investments are considered. Results are lower if you consider the dividend as a personal investment into this challenge.

Commentary

On an annualized basis I was able to achieve a 15.53% annual interest rate return. The 15.53% annualized return is an increase of 18.55% when compared to the prior month’s annualized return (13.10% last month versus 15.53% this month). What I found interesting is the S&P 500 index decreased by 5.64% in the same period. It is important to note that most savvy investors would not compare the S&P 500 index with the REIT results because they do not reflect like investments, but I do it here as a matter of fact in that many people think of the return in the market based on the S&P 500 rather than a REIT indices.

What sort of happened in this period was a trade war against China as well as the lowering of the Feds Federal Interest Rate. I think you saw people seeing the federal interest rate going down as a good thing for REITs because it means the cost of borrowing is lower which will increase profits. Increase in profits are good for investors. The trade war against China means that investors shifted investments from risky stocks to more stable stocks like REITs. Both of these helped this REIT increase in share price by about 2.0%.

As a everyday investor, part of me wants to liquidate the stock with a 15.53% return, but remember we’re in it for the long run. So although I love the 15.53%, I know that a great number like a 15.53% return is not really realistic when it comes to long-term investing. I am not a day trader so I’m not selling just because I beat the saving account rate of 2 - 2.5%.

Calculation

Below is how I calculated the percentage return based on keys in a financial calculator for a time value of money (beginning payment setting):

N = 9
I/Y = Solving (15.53%)
P/Y = 12 Months
PV = $0 Starting (Technically)
PMT = -$100 (Per Month Investment)
FV = $960.28 ($1,060.28 - $100 just invested which has no time to grow).

Expected Return Calculation

The expectation is that the market will return at least 7% over a long period of time. This is lower than the 9% many people tout with the broader market, but with investment fees and fund fees, that 9% often is decreased. To be ultra conservative in our expected calculation, we use 7% in our expected return. Below is the calculation of the expected return:

N = 9
I/Y = 7.00%
P/Y = 12 Months
PV = $0 Starting (Technically)
PMT = -$100 (Per Month Investment)
FV = $1,026.66 ($926.66 + $100 just invested which has no time to grow).

If you want to read more about this challenge, make sure you check out the REIT Investing Challenge page here.

To see more of our challenges, click on the challenge name below:

Until September, see you later.