Diving Into REITs

Comments on “The Basics of Real Estate Investment Trusts (REITs),” by Jaclyn McClellan, in the May 2018 AAII Journal:

Good article and overview of the differences between different types of REITs and benefits to get one interested in knowing more.

It would have been even more useful to me if there was some discussion on key criteria needed to compare, analyze and select REITs based on their fundamentals, as I’m sure with their distribution policy, the analysis should be different in focus in many instances than that of a typical stock. I imagine, like stocks, there are good ones and bad ones as well as signs that they may be starting to deteriorate fundamentally. Knowing how to look for the differences would be useful going forward.
—Brent Meredith from California

Jaclyn McClellan responds:
Thank you. The May article was part one of a planned series and was meant to give an overview. Part two will run in the July AAII Journal and will delve into how to analyze and compare REITs.

Bond Convexity

Comments on “Bond Convexity: What Is It, and Why Should You Care?,” by Brian Haughey, in the May 2018 AAII Journal:

It’s scary when increased convexity is taking place to an existing barbell and value appears to deteriorate on the face amount. Our only hope is to wait the multiple years until maturity or keep buying to lessen the increasing yield impact to original bond price paid when interest rates were lower. This is one diversification strategy that makes the portfolio look like it’s always on defense in your own red zone. The opposite would happen if yield weakened (in my case), but that’s not going to happen.

There is good information shared in the article. I still remember the days of having to calculate missing components of the formula without calculators.
—Terry Bearden from Indiana

Report Your Distributions

Comments on “Burden of Proof Is on Taxpayer When Documentation Is Missing,” from Briefly Noted in the May 2018 AAII Journal:

The taxpayer could have avoided ending up in tax court if he simply reported the distribution of the non-deductible IRA contribution in the year he took it. The IRS has copies of all tax documents and they are computer matched. An unreported distribution is a red flag and the IRS automatically assumes the maximum taxable amount in these instances. Had he reported the distribution as non-taxable or partially taxable, it is unlikely that the IRS would have taken any action.

Always, always report any amounts received on a tax document (in this case, probably a 1099-R) to avoid problems with the IRS.
—Barry Tolle from Washington

Life Expectancy in Retirement

Comments on “Are You Spending Too Little in Retirement?,” by Meir Statman, in the April 2018 AAII Journal:

Much can be said about making income last a lifetime. However, the language in Figure 1 presenting life expectancy from year of birth (ages 81.6 and 85.5 for males and females, respectively) misses the mark since years prior to retirement are not the focus of the article. A better illustration would have been to show the probability of survival for a person, say, at age 65 in retirement. The American Academy of Actuaries’ longevity illustrator (www.longevityillustrator.org) shows that an age 65 non-smoker in excellent health would have a 50% chance (think “life expectancy”) of living to ages 88 or 90, male and female respectively, and a 10% chance of living to age 99 or 101, respectively.
—Lynn Pyke from Louisiana