This fund is now down over 10% when I bought it a few months ago. Every little piece of bad news seems to make it go down more. Is it still worth holding onto for the long-term or should I take my loss and put the money into something less volitile and hopeless?
There is a general question here: when do you cut your losses and move on?
It tell ya, you are a lucky one. I rode this sucker all the way up, thought about selling, didn't do it, and now I am underwater. I finally sold because I want the tax writeoff so 'Bama doesn't get my money. I'll buy back in, I miss that fat dividend, so I'll be in but only after I am sure VNQ has hit bottom.
Never take a loss greater than 10% in any position. Bail out and wait. You'll miss a crash that's coming when the hedge funds have to pay out. Remember, they tell their customers they'll get a guaranteed return. (There's no such thing.)
About 30% of all the (junk) debt is owned by hedge funds. The federal government is not going to bail them out. They'll have to "cough, take a dump";
But when you "bail out and wait" whenever it drops 10% then you have just as much of a chance of bailing out at or near the bottom of a correction. Plus you have to take into account the extra transaction fees, and the taxes you need to pay on any profit you made.
If you are a long term investor like I am (30+ years to go) and you want an asset class to be a certain percentage of your portfolio, then it makes sense to stay in and ride out the corrections.
If you are a short term trader, good luck, because most can't beat the averages long term (according to academic studies anyway). And if you are a short term trader, I wouldn't be in this ETF, unless to short it.
But if you are investing for the long term, then I agree with the previous poster that suggested selling after a correction in a taxable account in order to take a tax loss and switching into a similar ETF such as RWR so that you don't lose exposure to the asset class. Also, I think it makes sense to trim gains in order to maintain the desired composition of the portfolio.
What is your timetable for your investments? If you have 5 or more years (long term) then you have no real problem with these fluctuations. REITs typically have cycles when they are in an out of favor. Actually, if your a long term investor then you might even buy down over a perid of time on REIT weakness. This is what I am doing right now. This will set you up for when REITs are growing again.
If your a day trader then selling your REIT depends upon your cash flow needs and outlook for other investments.
My time-table is long-long. I am about 50 and have this piece in an account I have ear-marked for my retirement. So, I am hoping to have it and other income producing securities in there for the rest of my life. I was having trouble dealing with the roller-coasterness of the market, which has sent VNQ into these remarkable ups and downs. For some reason it is not bothering me that much anymore so I am starting to fathom the concept of adding shares on the dips.
Thank you and to the others for many great responses. It all helps me greatly, as a person who only recently has started to invest.
This ETF is being dragged down because of the sub-prime fear, but as I look at the underlying stocks I don't see any sub-prime concernes. So this is an example of a stock being pressured below it's NAV without reason. I would suspect that you bought this as a contrairian play with that in mind just as I did! Well, we missed the bottom, but I suspect that it is just around the corner as the last of the weak holders out there sell at the bottom as they always do.
I am actually a long-haul holder but was thinking for a minute I had made a mistake, lost perspective and contemplated a sell. Now I agree, this holding will turn around and be fine in the long-run so am back to holding. I don't see a fundamental reason to lock in my losses as I do have reasonable expectation that in the scheme of things I will be okay here and can wait.
If you are not a long term investor, cutting loss at 10% is not bad at all.
Compared with historic yield of REIT, the yield now is way too low. Historically, yield of REIT is a bit higher than that of 10-year T-bill. Now 10-year T-bill yields around 5%. This fund yields only 3.5%. To get 5% yield for this fund, either earning grows 40% or price drops 30%.