RE can enhance return

CFA Level III
#1

y/n?

#2

yes

#3

only indirect, not direct, direct lowers risk

#4

ok, just making sure :slight_smile:

#5

^^ I read it this morning and that is def the case according to schweser…

#6

s23dino Wrote: ------------------------------------------------------- > only indirect, not direct, direct lowers risk or, is it the other way round? Direct you can use leverage.

#7

Direct is lower return lower and lower correlation with S&P and Bonds Inderect is Higher Return, and Lower Std then S&P

#8

so, it’s opposite of commodities where direct works better than indirect.

#9

Direct is lower return lower and lower correlation with S&P and Bonds ?? I am not sure… correlation is more than 0.6 with S&P

#10

comp_sci_kid Wrote: ------------------------------------------------------- > Direct is lower return lower and lower correlation > with S&P and Bonds > > Inderect is Higher Return, and Lower Std then S&P -This is correct.

#11

CareerChange Wrote: ------------------------------------------------------- > so, it’s opposite of commodities where direct > works better than indirect. Depends on how you look at it, depends if you are looking for return enhancement or lower risk.

#12

but they both increase Sharpe Ratio when added to stock and bond portfolio (Indirect just increases it more)

#13

In general: DIrect does not increase return but has fantastic diversification benefits. Indirect increases return but tend s to be correlated with equity movements. However, this is not all inclusive. There was a Schweser Question that displayed a chart showing Direct Real estate both improving returns and diversifying the portfolio. It all depends on the information given. But in general, I believe the above descriptions for direct and indirect are accurate.