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In an environment of very low interest rates, S-REITs are logical beneficiaries and in more ways than one. Regular readers would have heard this many times already. Readers who are new to my blog might want to read some of my older blog posts on S-REITs and why they are expected to continue performing well.
When we invest in S-REITs, it is with a primary aim of receiving regular and meaningful income. I have also said that any capital gains would be a bonus.
The outperformance of S-REITs' unit prices has led some holders to wonder if they should divest. Well, as market wisdom goes, taking profit is never wrong. However, I would ask that these holders consider if they have better places to park their money. Remember, money will go to where it is treated best.
In economics, we learn about supply and demand and how prices are affected by the relationship between the two. S-REITs are seeing their unit prices rising strongly because more investors are now putting their money in S-REITs.
In the last two years, I have had readers from Malaysia, Hong Kong, Europe and the USA writing to me. The early movers into S-REITs are sitting on some very nice capital gains and receiving regular distributions with yields as high as 10+% in some cases. What's more? Their investments have seen forex gains as the Singapore Dollar continues to strengthen against their home currencies!
I kid you not when I tell you that these readers are all very much richer than I am and have made much more money by being in S-REITs although they came in somewhat later. I am happy with how well things have turned out for their investments in S-REITs.
When Pat (a cboxer in Bully the Bear) told me that I have a pool of funds, I told him I know well that what I have is merely a puddle. Having self-knowledge and knowing what I have achieved is humble, I am not fixated by how much I have versus how much others have. Of course, I am only human and it used to bother me when I was younger.
Instead, just like starting a business, we should have a model for wealth creation. Being fixated with how much wealth we have versus how much others have does nothing to grow our wealth.
For someone who is investing in the stock market for income, first, have a clear goal and that, to me, should be to create meaningful passive income streams which will fully replace our earned income. Pick out likely candidates and do the due diligence to decide on the ones which are likely to help us achieve our goals.
Next, have discipline. Stay the course. Yes, stick to the plan. If circumstances have not changed, why deviate from a good plan? However, what if they did change? Then, ask why was our plan a good plan. If the reasons for the plan being good no longer exist, it is time for a change, isn't it?
| Maybank Kim Eng, 28 Sep 12: Year-to-date, we have seen many pension, insurance and income funds switching into REITs to pursue higher returns for the sheer fact that the yield-curve is almost flat. This is further aggravated by the almost "zero-bound yields" which meant that yields have no more room to fall, erasing any prospects of fixed income capital gains for investors. In the quest for returns, many such funds had to turn to slightly riskier asset classes such as REITs for stable recurring distributions. We believe that with the latest round of QE3 Infinity, ECB’s unlimited bond-purchase program and BoJ’s yen-asset-purchase program, coupled with the low interest rate environment and a yield-spread of 440 bps over the 10-year government bond with low earnings risk, would warrant further yield compression of 56-73bps, translating to 11%-14% upside for the S-REITs sector. Link: here. |
Now, is investing in S-REITs still a good plan?
Related posts:
1. Investing in REITs: A flawed strategy?
2. Staying positive on S-REITs.
3. Mr. Market is always right.
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