March 2019 Newsletter to Clients

Enjoy this month’s edition that features an update on the T. Rowe Price Real Estate fund and reminder about the upcoming tax filing deadline.

T. Rowe Price Real Estate Fund: As we’ve noted here before, periodically we meet with representatives of the funds we all invest in. Sometimes, we feel the need to escalate those conversations and speak directly with the fund managers themselves to understand the long-term strategy behind their investment decisions. We did that again recently when we talked in-depth with the team behind the T. Rowe Price Real Estate (TRREX) fund.

As background, we include real estate in portfolios for two main reasons:

1. To capture the upside returns of real estate as an asset class. JP Morgan studied the returns of different asset classes such as international stocks, the S&P 500 stocks, cash, etc., and found that Real Estate Investment Trusts – the real estate companies that funds invest in – had higher average annual returns than any other asset class since 2004. They also, however, experienced higher volatility – huge swings between good and bad years – than any other asset class. So, we want clients to benefit from those good returns while being careful not to add too much volatility to your portfolios.

2. To diversify client’s portfolios. Real estate tends to zig differently when the market zags and that can be good. For instance, during the 4th Quarter of 2018 when the S&P 500 declined 13.5%, real estate declined, but less. In addition, real estate tends to perform well as inflation increases because real estate companies can charge higher rents. So, that can help portfolios as other asset classes – such as fixed income funds – may not perform as well when inflation increases.

As the lead fund manager for TRREX just retired, we wanted to understand what, if any, changes in strategy the new fund manager would employ. They explained some subtle, but important, differences. We will continue to watch this fund closely and compare its performance to the relevant benchmark as these strategies take place. As always, we may make a change if we believe it will be in the long-term interest of our clients.

Tax Documents: In preparation for the upcoming tax filing deadline, the following important documents for 2018 were mailed by:

• 1099’s (TD Ameritrade issued in mid-February)
• Realized Gains & Loss Report for taxable accounts (TD Ameritrade issued in mid-February, found on consolidated 1099 form.)
• Management Fees Paid (No longer a deductible expense due to TCJA & no reports were mailed.)

Thank you for your continuing confidence.

Past performance is no guarantee of future results. The opinions expressed are those of Moneywatch Advisors, Inc. and are no guarantee of the future performance of any particular fund. This information is for educational purposes only and is not intended as investment advice. Please consult your financial advisor for more detailed information or for advice regarding your individual situation.