Sunday, January 5, 2014

REM may have farther to fall

I like REM. I take some of the income and reinvest it with caution. The remaining income I spend. I'm retired. I need money to live. (REM, if you don't know, is a U.S. mortgage REIT from iShares.)

I didn't pay too much for REM, I paid in the $12 range, and my wife paid even less. Even with today's low unit prices, my wife is in the black with her REM investment. Many investors cannot say the same. Some paid as more than four times today's unit price just a few, short years ago.

The saying "a rising tide raises all boats" doesn't seem to hold for REM. As the market booms, REM has been wilting.

With the Federal Reserve stopping their quantitative easing program of buying bonds, interest rates should start to climb. This will impact adversely on both the bond market and the REITs sector. REM may be in for another kicking. I have a chunk of my portfolio in various REITs but I didn't buy at the peak of the market. I have a cushion.

Still, one has to wonder how much damage raising rates will inflict on my portfolio. I have begun considering buying on dips and selling on little pops to make a little money in what I believe will be a falling market where REM shares are concerned.

Whatever I do, I will keep my overall exposure to this sector manageable. Don't risk what you can't afford to lose, I like to say.

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