bonds or REITS?

dancingfrog

Hello

Sorry if this has been discussed somewhere already. Currently I only hold all world tracker equity and am looking to diversify my portfolio by introducing other asset classes i.e. fixed incomes/properties.

I am reading around bonds and REITs and understand that they are useful diversifier with low correlation to equities. A lot of advice online (that I read) including VGLS's strategy are inclined towards utilising bonds rather than REITs. I was wondering if there's an obvious advantage(or disadvantage) of bonds over REITs that I'm missing?

I am looking for a very passive portfolio. Would diversifying in three asset classes provide significant advantage to just equity and bonds?

Keen to hear and learn from others. Sorry if this is a naive question.

Thanks again!
DF

Linton

Why not both Reits and Bonds? As you say they provide good diversification. Both can be particularly useful if you are seeking income rather than capital growth, which is why I hold both.

Reits are a niche subset of equity whereas the bond market is larger than the whole equity market. So bonds are far more appropriate for large scale diversification. In my view it is better for a small investor to invest in REITs directly rather than through a fund as they can be very different and so you may want to choose ones that particularly meet your objectives. I have only found one fund anyway that focuses on REITs and its not a tracker, so not appropriate for a confirmed passive investor. On the other hand presumably a passive investor would not be worrying about the characteristics of particular investments.