I mentioned a couple weeks back that I had placed some gaff fishing limit orders for VNQ in my traditional IRA account. Well one of those orders executed yesterday 10/05/16.
Woo hoo! Let’s talk about it!
First some background on where the cash for those limit orders came from. Back in May I transferred that IRA account from an expensive financial “adviser” brokerage, who had me mostly invested in expensive mutual funds, to a self-directed account at Charles Schwab. I waited a little while, but I eventually liquidated those high-fee mutual funds in July, which was pretty close to the market highs for the year. I’ve been sitting on around $10K of cash in that account since.
Sometime in late August or early September (I don’t remember exactly when), I decided if the cash was just sitting there, I might as well have some limit orders lying in wait. I decided to put in orders for VNQ at about 8-10% below the market price at the time.
I chose VNQ because I’m currently having a serious crisis of faith with REITs. I keep referring to that in posts, and at some point soon I will put together a more thorough discussion. I can tell you the conclusion though is that since I don’t really understand their finances, I’m done trying to pick one REIT over another. Thank goodness there’s a REIT index and a low cost (0.12% expense ratio) ETF that tracks it! I want REIT exposure, but I’m going to use passive indexing instead of individual stock picking to get it.
I wasn’t sure what would come of the September FOMC meeting, but I figured at some point, rate hike speculation would take VNQ back down a couple notches. That theory seems to be panning out, as VNQ is down 8.8% over the last month:
VNQ 1 Month Chart – Courtesy of Google Finance
The drop has triggered the first of my limit orders at $83.00/share. So I purchased 31 shares for $2,581.95, which works out to a cost basis of $83.29 after figuring for commissions.
Of course the second limit order is at $81.00, which is only 1.5% away from the closing price yesterday of $82.26. I’m fine if that order exercises too. That will lock up about half the capital in that account in VNQ. If I’m trying to catch a falling knife, I’ll still have $5K of dry powder to average down on this position.
I’m ready to have all $10K in that account invested in REITs. In spite of my crisis of faith, I’m sticking with the individual REITs I’ve picked so far (VER, HCP and OHI), which is about $7K worth of investments. So if load up on VNQ in this IRA, that will put my REIT allocation at ~$17K or about 5% of the wet worth.
I’ve set the account to automatically reinvest dividends, so this doesn’t affect my projected annual passive income. VNQ went ex-div in September, so it’ll be a while before that’s an issue anyway.
The Portfolio has been updated back at the mothership to reflect the new position.