Do excuse the puns – it’s hard to hold back when there are so many REIT words to say! As you may already know, I am a big fan of REITs myself and I can wax lyrical about their benefits all day long. But if you are still sitting on the fence and undecided about whether to onboard the REIT ship, let’s take a look at the approach you can take.
In my humble opinion, REITs are great investment choices if you are:
A dividend-seeking investor: REITs must distribute at least 90% of its taxable income to shareholders annually in the form of dividends. For the case of Singapore, these distributions are privy to tax exemptions.
A balance-seeking investor: REITs can be used to help provide a steady stream of income in conservative portfolios.
A growth-seeking investor: REITs can offer good opportunities for long-term growth in more aggressive portfolios.
So now you would be thinking: How do I evaluate a good REIT to invest in? While there is no magic crystal ball to peer into the future, looking at these factors will certainly help you make wiser choices:
#1. The general market outlook
Stronger economic growth prospects tend to mean good things. However, you should also bear in mind that REITs tend to focus on specific sectors such as Commercial, Industrial, Healthcare, Hospitality and Retail. Aside from looking at the big picture, it would be advisable to follow closely the outlook of the individual sectors you are interested in.
#2. The frequency and yield of payouts
Historical yields are not indicative of future performance BUT they can be helpful for you to discern a pattern of consistency. Prefer to receive regular payouts to fulfil your financial goals? Then frequency should be one of your key considerations in deciding which REIT to invest in.
To ensure a more well-rounded decision, you should also consider other factors such as interest rate environment and other metrics that measure the health of a REIT.
If you would like to know more, do connect with me anytime and I will be glad to share with you!
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