REIT Investing Challenge - May 2019 Report

REIT Investing Challenge - May 2019

I have been doing the REIT Investing Challenge since November 10th, 2018. This is the FIRST FULL REPORT for the REIT Investing Challenge. I have always reported the results of the challenge in a summary format on financialgrit.com, however, it just wasn’t ideal. Therefore this is my first “new” report of the results. But rest assured, the same investing profile was used since the beginning.

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 5/15/2019 dividend date (investments are usually made on the 10th and dividends are paid on the 15th):

Investment Month Number: 7
Amount Invested Each Month: $100.00
Investment: Real Estate Investment Trust
Total Amount Invested: $700.00*
Total Account Value: $721.36
Total Expected Value: $717.75 (See below for discussion)
Total Annual Interest Rate Return: 12.00%*

*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.

Basic Commentary

As this is the first report, I thought I would explain the numbers a little bit more than what happened that lead to these results. On 5/10/2019, I made my 7th investment of $100.00. That brought the total invested to $700.00 (excluding dividend reinvestments) and the account balance (after growth in the investment and reinvestment of dividends) to $721.36. All dividends gets invested back into the fund, no money is ever taken out.

You will notice that in the above results there is an amount that is reported as Total Expected Value. The Total Expected Value is what I would have expected the fund to be worth if I was able to get a 10% return on my money. So after 7 months, with my $100 investment on 5/10, I should have had a balance of $717.75. As you can see, as of 5/15 (I usually wait to include dividend reinvestments for the month before reporting total value), my investment has exceed the expected value by about $4.00.

Why 10%? If you read articles on the internet, people swear by a 9% - 10% return over the long haul of the stock market. So why not use that as a gauge of where this account should be. I will always put the expected value so you understand what the goal is and how close we are to the target. Some times we will be over and sometimes we will be under. The goal is always to be over.

The final statistics you will see is the annualized interest rate of return. This is a complex calculation if you haven’t taken a finance or accounting course. But basically I use a calculator that annualized the return. It takes into account time, investment per period, start balance, and end balance to come up with an interest rate that we can base everything to. A 12% return over 7 months is really good, but that may not be sustainable, we will see how the future holds for this challenge investment. This is only a reference, we need the results to be consistent in the future to make it work. A one-time blip or some good luck in the short term doesn’t mean that is what we are getting on the long haul. Remember, investing for the long term is a marathon, not a sprint.

Some may wonder what investment am I using. The answer is…I won’t say. This site is not a stock picking investing site. I also do not want to influence a particular person’s decision based on a website commentary. As a prudent investor, you need to make those choices for yourself because ultimately, the results of your own investments are going to hurt you and only you. I do not post which investments I use for my challenges, but I can assure you they are all reachable by everyday people. Instead of giving you the stock, I am giving you the investment category. In this case, I am investing $100.00 in a Real Estate Investment Trust.


The Results Commentary

The results have been remarkable since I started in November and I am wondering if it is due to the correct timing and/or because the conversation regarding trade and future recession are making investors move their money to more hard assets, aka REITs. This often does occur in an investing life cycle. It’s important to understand that what makes the price of an investment to go up is the demand for the investment increasing. So if more people are moving money from traditional equities to REITs, the price of those investments will go up.

It is also important to reiterate that if you are investing for the long term, it is important to invest for the long term. This means that we don’t overreact when the market goes down. The market will go down, that’s a fact. The market will go up over a long period of time (or at least that is what we’ve been told and that is what has happened in history). It’s not time to sell low and buy high, we really need to ride it out. So instead of not investing when the market is down, you should continue investing because you are buying those securities on the cheap.

Summary

So May was a great month overall. However, being in this for only 7 months doesn’t give you real stability. It’s the long run that will count. Plus, it’s like I bought all of my investments this month on the cheap side. Only time will tell if I make money from this investing strategy.

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:

  • The $150 Investing Challenge

  • S&P 500 Index Fund Challenge

Until June, see you later.