I recently visited Machu Picchu, and a fellow hiker asked me what I do for work. I explained that I run a real estate investment club and that we pool small amounts of money to collectively buy fractional shares in large apartment complexes. She furrowed her brow and replied, “But why would I need to bother with all that private equity stuff? I’m already diversified into real estate with REITs in my brokerage account.”
I cringed at her use of the word “diversified.” Because for all the benefits of real estate investment trusts—and there are many—they don’t do the one thing that most investors think they do.
They don’t provide much diversification from your stock portfolio.
But I’m getting ahead of myself.
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