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How much of my portfolio should I put in REITs for real estate exposure?

Answer

There is no single right number, but many advisors suggest a modest slice, often in the range of 5 to 15 percent of your stock allocation, if you want dedicated real estate exposure beyond what you already own through a total-market fund. Remember that broad U.S. index funds already include listed REITs, so a total-stock-market holder isn't starting from zero. REITs add diversification because their returns don't move perfectly with the rest of the market, but they can be volatile and rate-sensitive. If you own a home, you already have concentrated real estate exposure to weigh. Model different allocations with the Portfolio Builder at wealthserene.com/tools/portfolio-builder before committing, and keep REITs in a tax-advantaged account when possible since their dividends are mostly taxed as ordinary income.

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