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Follower ○○○

Dry Powder from Sale of REA

REA served its purpose admirably. It provided years of decent, anxiety-free returns and enabled us to exit unscathed while stocks plummeted in the blink of an eye. (Perhaps I should say “our” purpose rather than “its” purpose. TIAA would have preferred that I just go down with ship.) Those of us who did exit have (or had) lots of “dry powder.” (My own holdings had been 48% REA, 42% stocks and stock funds, 10% cash.) My intention was to add about 50% of the cash from the sale of REA to my battered equity holding until REA eventually starts moving up again. I managed to invest about 13% of the cash fairly close to the March bottom, but am unsure of what to do now that the market is higher: wait for another plunge, dollar-cost average from here, some other strategy . . . If you’re facing a similar decision, what are your thoughts?

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Frequent Contributor

Re: Dry Powder from Sale of REA

As T-REA is neither equity nor bond, I parked the proceeds in Traditional. Some of it may go to equity later but I am not in rush. There may be another opportunity for that or not.

YBB
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Re: Dry Powder from Sale of REA


@Tibbles wrote:

.................... I managed to invest about 13% of the cash fairly close to the March bottom, but am unsure of what to do now that the market is higher: wait for another plunge, dollar-cost average from here, some other strategy . . . If you’re facing a similar decision, what are your thoughts?


Can only tell you what I will do. I am going to wait and if we have another market plunge, then buy some, otherwise not buy anymore. For me, I really do not need more equity, but I like a good opportunity.

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Explorer ○○

Re: Dry Powder from Sale of REA

For me, moving the proceeds from sale of my SRA account T-REA into (SRA) Traditional was pretty much a no-brainer.  3% and the ability to move it back into T-REA or possibly even into equities at a later time made that an obvious choice.  I also sold the T-REA in my RA account.  Those proceeds are still sitting in a m/m account, which I am fine with for now.  I may eventually elect to move those funds into (RA) Traditional too. But that's a more permanent decision which needs a little more thought & deliberation.

So much depends on what percentage of your retirement funds you are reallocating here, and where you are in your retirement timeline.  I had only a modest % of my retirement funds in T-REA, and am at the overdue-to-retire point, so its prudent for me to be pretty conservative.  Your circumstances may well be a lot different...

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Participant ○○

Re: Dry Powder from Sale of REA

My thoughts are very close to what yogi's and FatKat's. 

Additional comment:  If I were you, I would first put aside what the market might do and first determine what % allocation, a number or a range, to equity is appropriate for me given my/our specific situation.  Only after that, I would tackle the question you raised.  Maybe that is what you are doing but I don't know. 

Edit/Add;  I saw BullBleep's post after I posted mine and agree with him too.  One difference is my Trad is 100% liquid since it's 100% SRA..

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Explorer ○○○

Re: Dry Powder from Sale of REA

Hi,

My case is different because my TREA was all in either Roth IRA, Traditional IRA, or GSRA and all went into the corresponding TIAA Traditional account. The largest amount by far was in the Roth IRA. My combined TIAA Traditional return is now 1.85% with the IRAs returning 1%.

So I am moving funds from my TIAA IRAs in small amounts (5 figures) into corresponding Fidelity and Vanguard accounts. In Fidelity and Vanguard I am beginning to buy individual stocks and some funds that are dividend producing. A couple of examples are T and VZ, T for the higher dividend and VZ for the dividend with I hope better growth potential. Also bought MasterCard and Visa along with a couple of Utilities. Slowly buying in 100 share units on down market days and holding lots of cash for the future. We do not need the income (therefore dividends are reinvested) but I believe dividend producing stocks give better over all returns. Am looking at buying VNQ since it is still down 25% (NAV) YTD but again only in small amounts on down days. Also put more dollars into VWINX last week. Vanguard also has a investment grade corporate bond fund with about 2.9% yield and very low ER we are looking at.

This I am hoping will give us better than 1% returns we get from TIAA Traditional in the IRAs.

S

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Follower ○○○

Re: Dry Powder from Sale of REA

Thanks to all for sensible advice. I’m envious of those of you who have access to a commitment-free 3% from TIAA Traditional. With a T-REA upturn unlikely, I think, for quite a long time, yes, Learner, I’ll have to face the question that the availability of this unique investment had enabled me to avoid: What baseline percentage of assets do I dare devote to equity? (I’m not a fan of bonds.) In the meantime, I guess I’ll do what some others here plan to do: wait for another “fat pitch” (which may or may not come) before buying more stock. Like you, Skipper, I transferred my TIAA traditional IRA to my Vanguard traditional IRA. Your selections there sound good, though I’ve found that I don’t like worrying about individual stocks.

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Follower ○○○

Re: Dry Powder from Sale of REA

Does this thread represent any sort of consensus that the time to sell TREA has arrived ?

 

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Frequent Contributor

Re: Dry Powder from Sale of REA

Consensus of how many? TREA has thousands of shareholders.

I see the AUM of TREA  at the end of April is around $25 billion. A very modest decrease. 

I have no idea what the future holds, which is the case for many investments.

And, interestingly, today's Wall Street Journal has a graph of various asset classes and their declines during covid-19.  Real Estate has been blasted.

By how much is TREA down since its high? By how much is TREA down compared to other segments of one's portfolio? (Shh. Keep it a secret!)

Me. I sure have seen other positions in my portfolio down considerably more even as they have bounced back some. Perhaps I am the only one to take paper losses in addition to some tax loss harvesting. 😉

Bob

 

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Participant ○

Re: Dry Powder from Sale of REA


@RustyShacklefor wrote:

Does this thread represent any sort of consensus that the time to sell TREA has arrived ?

 


It does. And especially if you can exchange much of it into TIAA Traditional in an SRA/GSRA paying the current 3% minimum...

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Participant ○○

Re: Dry Powder from Sale of REA

Bob wrote:  "By how much is TREA down since its high? By how much is TREA down compared to other segments of one's portfolio?"

You have a well-thought out and well-planned retirement investment strategy.  It has been working well for you since 2000 (?).  I have no doubt that your approach will not fail you.

I have a strategy too.  No bonds or bond funds, I use Trad instead.  A reasonable amount of cash. 

The remaining issues for me are my allocations to stock index mutual funds and TREA.  I handle them differently.  I have no idea, none at all, what the stock market will do at any point.  So I choose my allocation to stocks carefully and leave it alone.  To me, TREA is different.  At some points, its relative attractiveness compared to minimum 3% Trad changes.  When it seems more attractive than Trad, I go with TREA and stay with it for many years.  When it seems less attractive than Trad, I switch to Trad.  I find myself in such a position rarely, two ins since 1995 and two outs since 1995 including the March 2020 exit. 

No Einstein here, but this is my relativity theory.  :-)

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Frequent Contributor

Re: Dry Powder from Sale of REA

I love your relativity theory, Learner.

I was responding to the notion of "consensus."

I hardly think the number of TIAA posters here represent a "consensus" of TREA shareholders.

I also stated what is obvious up to this point (not being able to forecast the future): namely, that relative to many other holdings TREA, to date, is down very modestly.

I wish you good health and prosperity. 

Bob

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Follower ○○○

Re: Dry Powder from Sale of REA


I was responding to the notion of "consensus."

I hardly think the number of TIAA posters here represent a "consensus" of TREA shareholders.

I also stated what is obvious up to this point (not being able to forecast the future): namely, that relative to many other holdings TREA, to date, is down very modestly.


I wasn't asking about a consensus of all TREA shareholders, the vast majority of whom probably give very little thought to it; I was asking about the people where who DO.

But agreed, I believe it's down a percent or two from all time high, very modest indeed, by comparison with the equity market (not to say it's equity).

 

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Participant ○○

Re: Dry Powder from Sale of REA

Rusty,

I'll try to give you an idea based on what they posted.  I am relying on my memory so this information is not reliable.

Sold TREA, at least partially, if not fully - Learner, yogi, juris, Skipper.  Wizard (?)  judger (?)    Esteban got out a long time ago.

Maintained TREA - Bob, John (jjustice)

Corrections are welcome.

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Frequent Contributor

Re: Dry Powder from Sale of REA

@Learner , a distinction should be made for those with accumulating vs annuitized T-REA.

With once/quarter withdrawal rule, accumulating T-REA holders faced a critical March 31 date. FWIW, I sold some before and most after, and still have a foothold position.

People with annuitized T-REA with annual re-valuations locked in March 31 price for payouts from May 1 - April 30, and Bob may be among them. They don't face a decision for a year although they are free to change annuity income stream anytime. For those with monthly re-valuations, 20th of every month is critical date for pricing.

 

YBB
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Frequent Contributor

Re: Dry Powder from Sale of REA

Hi Yogi,

Annuitants also have a once a quarter rule.

Bob

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Participant ○○

Re: Dry Powder from Sale of REA

yogi,

Regarding the foothold position, will you explain why you do it.  Is the main reason that at some future point TREA may treat those with a foothold position better than those without in terms of restrictions such as maximum amount or even allowing to invest in TREA?  Could a foothold position be useful only if the current rules change or is there an advantage even under the current rules (I don't believe so)?  Do you do it just to be on the safe side or is there a stronger reason?

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Re: Dry Powder from Sale of REA


@Learner wrote:

yogi,

Regarding the foothold position, will you explain why you do it.  Is the main reason that at some future point TREA may treat those with a foothold position better than those without in terms of restrictions such as maximum amount or even allowing to invest in TREA?  Could a foothold position be useful only if the current rules change or is there an advantage even under the current rules (I don't believe so)?  Do you do it just to be on the safe side or is there a stronger reason?


Just in case T-REA was closed to new investors. Small foothold position will keep my options open. 

Rules on closing/opening or limits can change on short notice. 

There is a fund at Vanguard that is not only closed to new investors but existing investors can add only $25K/yr. Someone [ @crnhskr ] recently posted about Principal real-estate fund that has already suspended redemption. So, restrictions may be in a variety of forms.

YBB
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Follower ○○○

Re: Dry Powder from Sale of REA

Right, Rusty, REA is down only a little so far. Its turns are like those of an aircraft carrier, giving participants ample time to exit with negligible loss when a significant downturn seems likely. Of course, that’s because its many directly owned properties, which constitute the bulk of its holdings, are conducted on a 3-month cycle. REA lost about 40% during the last recession. Let’s hope it loses a lot less during this one. But I’d be surprised if its returns over the next year or two aren’t negative, especially with the prospect of reduced demand for office and retail space even after the recession and health crisis are over. I’ve lost enough in stocks without taking an avoidable loss in REA!

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Follower ○○○

Re: Dry Powder from Sale of REA

Re: Dry Powder from Sale of REA
@Learner wrote:

yogi,

Regarding the foothold position, will you explain why you do it.  Is the main reason that at some future point TREA may treat those with a foothold position better than those without in terms of restrictions such as maximum amount or even allowing to invest in TREA?  Could a foothold position be useful only if the current rules change or is there an advantage even under the current rules (I don't believe so)?  Do you do it just to be on the safe side or is there a stronger reason?

Just in case T-REA was closed to new investors. Small foothold position will keep my options open. 

Rules on closing/opening or limits can change on short notice. 

There is a fund at Vanguard that is not only closed to new investors but existing investors can add only $25K/yr. Someone [ @crnhskr ] recently posted about Principal real-estate fund that has already suspended redemption. So, restrictions may be in a variety of forms.

YBB
 
I too kept a foothold position, for the same reason as yogi.
 
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