The Ignorant Investor

Looks like professionals are continuing to pile into REITs even as individuals are starting to pass:

Investor demand for REITs was strong in August, especially among institutional investors flocking to the four real estate ETFs.

Collectively, the iShares Cohen & Steers Realty Majors (ICF), Dow Jones U.S. Real Estate Index (IYR), streetTRACKS Wilshire REIT Fund (RWR) and the Vanguard REIT Index Fund (VNQ) saw $478 million of inflows in August, compared with an outflow of $374 million in July, according to TrimTabs Investment Research.

Meanwhile, regular mutual funds, which are where individual investors are more likely to put their money, saw just a $3 million inflow, roughly unchanged from July.

What this shows is that "individuals are not chasing prices and the professionals are," says Carl Wittnebert, director of fund flow research with TrimTabs.

http://www.thestreet.com/_yahoo/funds/nicholasyulico/10240810.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA

I'm sorry I missed the boat on commercial property REITs, and I've been thinking of dropping money into the sector for the long term. But they're trading at a significant premium over the market value of the properties they own, and the estimated yields on these ETFs are at a bond-like 5% or so (I say estimated because apparently actual yields on REITs depend on end-of-year accounting and won't be known until January 2006 at the earliest). In other words, they're pretty darn expensive, we likes to buy our preciouses when priceses are low when compared to historical averages.

And it's not like the pro's aren't known to dive out of sectors as quickly as they've piled into them. You got to wonder about the upside potential versus the risk involved. Then again, that's what I've been saying for about three years as everyone has made a ton of money on these. Then again, it's not a real gain until you cash the sucker in.

(P.S.-- The link is long because the easy-to-use #%&@* blogger software won't display the link for some reason.)