WASHINGTON, DC—"The income-oriented portfolio provides slightly less annual total return, but a greater income return,' according to a new study conducted by Santa Monica, CA-based Wilshire Funds Management and sponsored by NAREIT. "For many retirees this may be the appropriate trade-off." Furthermore, the study says, adding REITs to a retirement portfolio is "critical to achieving the goal of generating a stable income with a reasonable level of risk tolerance."
Using 40 years of investment return data through 2015, the study shows that adding a range of high income-generating assets—including REITs as well as preferred stocks and other vehicles—to a traditional retirement-stage portfolio could boost income returns by nearly 40%, while providing comparable total returns and no increase in risk. The research is based on a variation of the Mean-Variance Optimization method for portfolio modeling, incorporating a requirement for a specified level of income return.
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
