Saturday, January 12, 2013

A Good Post on REIT Investment

A useful reference for all those interested in REIT investment that I read from 'A Singaporean Stock Investor'

Five steps to take in REIT investment.

Monday, January 7, 2013
This evening, I had a short exchange with a good friend who has put his faith in my little ideas and made some good money in certain S-REITs so far. An S-REIT which he has been looking at recently is Sabana REIT but he is hesitant.

Now, I would not tell people if it is a good time to buy or to sell anything in the stock market. Regular readers know this. It is only on hindsight that we could tell if it was a good time to buy or to sell. Everyone has perfect hindsight. Not very useful, is it?

Then, how did I decide so long ago that S-REITs are where I would be putting the bulk of my investible cash? How did I know that S-REITs would perform so well? How did I pick the S-REITs that I put so much of my money in?

Want the answers? Read my past blog posts. Do I hear a collective sigh?

OK, I know I have many more than a thousand blog posts by now and it would probably take quite a bit of time to trawl through them but I have hand picked a few and provided hyperlinks in the right side bar for your easy reference.

In this blog post, I want to share what I think I can safely share with anyone without getting into trouble and that is my general approach to the issue of investing in REITs. I try not to be repetitive but it is hard to avoid repeating at least some of the stuff I have said before in earlier blog posts. Anyway, I hope this helps anyone who is in the same situation as my friend:

Step one, know what is a REIT. Yes, don't laugh! People buy things just because it is the flavour of the month or year sometimes. It is true! Know what is a REIT and whether it fits your investment objectives. If you don't know what you want out of your investments, please leave your money in your bank account. For those who do know, remember that investing in REITs is basically for income and that any capital gain is a bonus.

Step two, if investing in REITs fits your investment objectives, look at the numbers of the different REITs available and see if you like them. If you read my blog posts on the different REITs I am vested in over the last 2 to 3 years, you will get an idea of what I look out for when I examine their financial reports. My approach is by no means fool proof but I believe that it does a pretty decent job.

Step three, if you like the numbers of certain REITs even at their current unit prices, then, they are still good investments for you! Doesn't sound like a difficult conclusion to arrive at, does it?

Step four, decide how much of each REIT you want to buy into at the current unit prices. As a percentage of your total investible cash, how much would you be comfortable with investing? Now, this is a very personal question. Some people are conservative while some are bolder. Two people could have the same belief that being partially invested while keeping a war chest ready is the way to do it but differ as to the proportion of investible cash to use.

Step five, buy, hold and monitor. Yes, don't think that everything is hunky-dory after making your investments. You want to monitor how they are doing on a quarterly basis. Keep track of macro trends and think how these could affect your investments. If you stay on top of things, you will feel confident in your investments and if there should be opportunities to buy more on the cheap, you would be able to act decisively. By the same token, you would also know when prices are somewhat rich and that partial or full divestment could be a good choice.

So, should my friend be buying into Sabana REIT now? Only he has the answer.

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