Our financial planner has recently suggested that we move some of our IRA funds out of stocks and into a Real Estate Investment Trust.

In our case, this would be Behringer Harvard REIT 1, Inc.

I've only been recently going over their online information, but have to wonder if this exposure in commercial real estate is even a good direction to be leaning in light of the current economic downturn.

Obviously we're getting advice from a financial planner, but I'd like to hear what some of y'all experts have to say regarding this type of move.

Thanks in advance for your consideration and advice...

John

JScott354 -

In general, buying into a recommendation from your financial planner is not without its problems. Sometimes, a company will only allow certain brokers or authorized financial advisers to sell their products and that is not always a good thing because there is an immediate conflict of interest with exclusive selling privileges.

It begs the question, can your financial advisor really be objective in recommending an investment to you if that investment is exclusive only to his/her clients. Your financial advisor is given a better commission rate for a deal like that over other deals, that's why he/she recommends you to it. Do you follow what I'm saying?

The real estate market has suffered over the past 2 years and many analysts who cover this market wonder where the bottom really lies. It's hard to know. Maybe it is a safe bet but maybe it isn't. You'll feel a whole lot better about your decision when you understand the dynamics of the investment. What are its major holdings and how does it manage its risk diversification? Just some things to consider but there are certainly more.

Regards.

I know you probably don't want an "it depends" answer, but it does, in fact, depend! If it is small portion of your overall portfolio, it is probably part of an intentional diversification plan devised by your financial planner. REITs an other types of real estate investments can be a valuable part of an overall asset allocation strategy. Ask your adviser if he or she can run a report for you that shows you what your current asset allocation is. Real estate is most often recommended as less than 15% of a portfolio. However, there could be valid reasons for your plan to differ from what is "most common". I'm sure your financial planner can give you more information regarding his or her rationale for choosing this investment for you. You can also read the prospectus and other information that your planner would have given you before or at the time of the transaction.