REIT Investing Challenge - July 2019 Report

REIT Investing Challenge - July 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 7/15/2019 dividend date (investments are usually made on the 10th and dividends are paid on the 15th):

Investment Month Number: 9
Amount Invested Each Month: $100.00
Investment: Real Estate Investment Trust
Total Amount Invested: $900.00*
Total Account Value: $940.32
Total Expected Value: $921.29 (See below for calculation)
Total Annual Interest Rate Return: 13.10% (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 13.10% annual interest rate return. During the past month we saw the S&P 500 increase by about 4.4% whereas we saw this REIT decrease by 3.6%. During the past month we heard a lot of news that increased the market’s return. That information was not necessarily positive for REITs. What I have seen in the past is that when the market is doing well, REITs tend to lack that of the broader market . When the broader market is not doing well, REITs are doing pretty well. This has to do with the stability of REITs, especially those that have long term contracts with the tenant that specifies rent at X dollars for X number of year. That is usually a safe bet rather than the broader stock market. I think that had a lot to do with the decrease in REIT’s value.

We are still up 13.10% on an annualized basis, which is still better than the expected 7% return we are trying to stay above.

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 = 8
I/Y = Solving (13.10%)
P/Y = 12 Months
PV = $0 Starting (Technically)
PMT = -$100 (Per Month Investment)
FV = $840.32 ($940.32 - $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 = 8
I/Y = 7.00%
P/Y = 12 Months
PV = $0 Starting (Technically)
PMT = -$100 (Per Month Investment)
FV = $921.29 ($821.29 + $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 August, see you later.