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[aardvark]

I'm thinking about opening a Vanguard (index) REIT.  This is money I wouldn't have to touch for 25 years or more, so I'm not worried about how over-valued commercial real estate might be; I plan to dollar cost average, and I figure I'll make money on it over time.

But I'm torn because this isn't part of my retirement fund, and REITs have a pretty high yield: am I crazy to choose a dividend-producing index fund over just putting more in my S&P 500, small caps, mid caps, and European funds, which all emphasize growth over dividends (and hence have tax advantages)?

[bluesky]

If you like the fund I wouldn't call it crazy, although I notice the mutual fund finder tools on T. Rowe Price and Vanguard recommend growth funds for a 25+ year time horizon and dividend-producing ones for shorter time horizons.

Not a REIT,  but I have some money in a dividend-producing fund that has done well enough to have unpleasant tax consequences for me. My solution has been to put the dividends into a tax-deductible IRA, since I currently do not have a retirement plan from work and my income level is low enough (low enough for the taxes from the mutual fund dividends to be painful!) that I am eligible.

[abdbiz]

i would just go with the total mkt fund

[acrimone]

Diversify.  A little bit of Reit, a little bit of NASDAQ...

[mileage_may_vary]

Have you considered a Roth IRA?  Depending on how you set it up, you can control the investments.  You can only put in a maximum amount each year, so you couldn't drop the entire 25K in at once, but it's rather handy for tax purposes:  you put in already taxed money, and on retirement can pull it and the gains out tax-free.

YMMV

[aardvark]

Thanks for the feedback.  I do indeed have a Roth, with TIAA-CREF (though obviously I can easily set up a different one for future contributions).  With TIAA-CREF there is no REIT, I believe-- just their own direct real estate holdings (am I the only one who enjoys getting those little notices from time to time saying "You now own a teeny tiny little piece of yet another building"?).

I appreciate the point about dividends being better for short time frames than for long ones.  For me, it's just a question of wanting to be in real estate for diversification.  Basically right now I have 80% in stocks, 10% in cash, and 10% in TIAA real estate-- I don't own any residential property, but rent instead.  Any dividends I make from a REIT would be reinvested, but with dividends of 4-7% over the past few years instead of the .25 to 1.3% that my other, growth-oriented funds produce, that's perhaps more taxable income than I want from investing.