I recently received this great question from a reader:
“Hi FH, Can you give me your opinion?
While expecting some interest rates cut, the likelihood of US slipping into recession has become bigger.
I have some REITs counters like CICT, Keppel DC Reits and MIT which are making profit of about 20% and CDL losing about 15%.
I understand interest rate cuts will benefit the REIT but at the same time, I am worried about the recession.
Do you think it is good idea to sell the REITs now and buy back later?
I intend to hold on to CDL and to buy more if it drops further.”
My response?
For the record, this was my answer:
“If you don’t mind I may write further on this to expand on the answer.
But the short answer is that it depends on how much of your portfolio is invested, and the counter in question.
If you have a lot of your portfolio invested, and if the charts for the counter looks like its topping out, then it may make sense to take profit on a certain percentage of the REITs (eg. 1/3, or possibly more).
For me at least, REITs are about 30% of my portfolio. But charts wise the REITs look bullish so I am continuing to let them run for now.
But this question needs to be answered unique to each investor. If you have very heavy REIT exposure, and a big drawdown from here would make you uncomfortable – doesn’t hurt to lock in the profits for a certain % of your REITs.”
But as you can imagine, the answer to this question is a nuanced one, and the more I thought about it, the more I thought my answer didn’t