Building a REIT Portfolio · REITs

A portfolio review should compare results with the original purpose and risk limits. Rebalancing is a process for maintaining exposure, not a prediction of tomorrow's prices.

Choose a relevant comparison

A broad equity index and a focused property portfolio have different exposures. Select a benchmark consistent with geography, property mix and currency, and use total returns on both sides. Comparing your income plus price return with a price only index exaggerates relative performance.

Separate cash flows from investment results

New contributions increase the account value without representing investment profit. Withdrawals reduce it without necessarily representing loss. For a simple period without external flows, return equals ending value plus cash distributions minus starting value, divided by starting value. More complex cash flows require an appropriate time weighted or money weighted method.

Rebalance with costs in mind

A holding can become larger because it outperformed, because others fell or because you added capital. Review the reason before trading. New contributions and cash distributions can sometimes restore weights without selling. Tax consequences, spreads and commissions influence the decision.

Record changes to the investment case

Separate a price decline from evidence that the original thesis is wrong. Tenant deterioration, unexpected capital needs or a weaker balance sheet can justify a review even if the price has not moved much. Use scheduled reviews plus event based triggers, and keep a written record of the evidence behind changes.

Try it yourself

A portfolio starts at $20,000, ends at $19,500 and distributes $1,000 in cash, with no contributions or withdrawals. What is the simple total return?

Show the worked answer

Ending value plus distributions equals $20,500. The $500 gain divided by $20,000 gives 2.5% before fees and taxes not already reflected.

Further reading

Educational material, not a recommendation to transact. All numerical examples are hypothetical and exclude costs unless stated. Actual terms, eligibility, tax treatment and broker procedures depend on the security and jurisdiction.

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