September 27, 2021

Categories: Investment

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Before we dive into the heart of the topic, let me begin with this time-honoured quote from Franklin D. Roosevelt, who once said, “Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world.” This belief is what drives some investors to put their money in these relatively low-risk, stable-return instruments.

However, there must be context to understand this. In land-scare Singapore, real estate prices are sky-high and not everyone can fork out the cash to invest in multiple properties. So the question remains: Is there a way to invest in real estate with a limited amount of money? The answer is yes and can be found in what we call real estate investment trusts or what is commonly known as REITs.

REITs is a term referring to listed companies that invest in the real estate business and allow people to invest in them (the companies). The difference between REITs and other publicly listed companies on the stock exchange, is that the latter uses investors’ money to run businesses, whereas REITs channels the money invested to buy, maintain and manage properties.

This means that by investing in REITs, you are essentially ‘investing’ in real estate without purchasing the physical property. Some investors see it as a portfolio diversifier that can help reduce overall risk and increase returns.

How so? You enjoy more diversity in your investment portfolio without the risk and expenses of owning and managing these properties. Stable returns come in the form of dividends, as REITs are legally required to distribute at least 90% of their income to the investors. This makes them a preferred investment choice to fund retirement income. Furthermore, investors can choose to reinvest their dividends to enjoy the magic of compounding.

Find out more about what other advantages REITs can bring to your investment portfolio. If you are not sure where to get started, I will be glad to share what I know with you anytime.

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