Ron and Dave dissect some of today’s most important REIT ETFs.
I am feeling lazy, as always, and didn't want to write about the new REIT ETF but I received so many messages that I decided, maybe, I should say something.
I didn't want to blog about the ETF because it is easy enough to understand. It will hold a basket of REITs, 23 to be exact, from countries such as Singapore, Hong Kong and Malaysia. It will distribute income quarterly and the distribution yield is estimated to be 5% at IPO.
The ETF is probably a good choice for people who want to have exposure to REITs but are too lazy to be bothered with researching individual REITs. OK, I understand the lazy bit but they will have to take the good with the bad in the ETF.
For people who know more about REITs, they are probably better off investing in individual REITs. I don't know about you but a 5% distribution yield from a REIT product is unattractive to me.
Well, remember that REITs are leveraged instruments. Leverage magnifies gains. So, the 5% yield is after magnification. Taking into consideration that they distribute 90% to 100% of their cash flow (i.e. they have zero retained earnings), a 5% yield doesn't seem attractive.
To me, the only good thing about the ETF is that having a portfolio of 23 REITs reduces concentration risk.
However, if diversification is what we want, we can try to form our own REIT ETF.
Taking from my portfolio, for example, we could put together an "AK REIT ETF":
1. AIMS AMP Cap. Ind. REIT
2. FIRST REIT
3. Frasers Log and Ind. Trust
4. Ascendas Hospitality Trust
5. IREIT Global
6. Croesus Retail Trust
7. Religare Health Trust
OK, I am being a bit liberal here since not all are REITs but you get the idea.
Assuming equal weight given to the 7 components in "AK REIT ETF", we are looking at a distribution yield of more than 7%.
"AK REIT ETF" would generate at least 40% more in income than "NikkoAM-Straits Trading ex-Japan REIT ETF".
Oh, did you notice that my REIT is also less of a mouthful? Yes, I know. Bad AK! Bad AK!
Of course, we would also have control of what we want in and what we want out. We could also change the weight of each component.
If we are investing in REITs for income, if we want some diversification, then, perhaps, NikkoAM-StraitsTrading ex-Japan REIT ETF is a decent option.
Otherwise, the ETF really doesn't seem attractive to me at all.
UPDATE (16 March 2017):
What happens if one of the REITs (or a few) in the ETF had a rights issue?
A reader found out from the horse's mouth:
"Is early retirement the right financial choice?" Jim Ellis discusses long-term financial growth strategies. I have blogged ab...
Past blog posts now load week by week. The old style created a problem for some as the system would load 50 blog posts each time. Hope the new style is better. Search archives in box below.
FOLLOWING MY BLOG
Get this Recent Comments Widget
ASSI's Guest bloggers
- 5 cents 10 cents
- Bf Gf Money Blog
- Bully the Bear
- Clueless Punter
- Consumer Alerts
- Dividend simpleton
- Financial Freedom
- Forever Financial Freedom
- GH Chua Investments
- Heartland Boy
- Help your own money.
- Ideas on investing in SG.
- Invest Properly Leh
- Investment Moats
- JK Fund
- MoneySense (MAS)
- Next Insight
- Oddball teen's mind.
- Propwise.sg - Property
- Rolf Suey
- Scg8866t Stockinvesting
- SG Man of Leisure
- SG Stocks Investing
- SG Young Investment
- Singapore Exchange
- Singapore IPOs
- STE's Investing Journey
- STI - Stocks Info
- T.U.B. Investing
- The Tale of Azrael
- UOB Gold & Silver
- Wealth Buch
- Wealth Journey
- What's behind the numbers?
- Yaruzi's Learn 2 Live
Monthly Popular Posts
I am going to pre-empt a response to this blog and say that although I am known more as an investor for income, I also invest in stocks whic...
I always say that I have been mostly lucky as an investor. The operative word is "mostly". Long time readers would remember the ...
I think there are quite a few readers who are confused about the difference between contributing to their CPF account and topping up their ...
"There were no worries. It was easy money." Dear AK, Morgan Stanley thinks that property prices in Singapore will double by 2...
Japan is rising from recession. Produced by NHK Int'l. In my last blog, we saw that I made some changes in my S-REITs portfolio in ...
I met three friends for lunch a few days ago. They are all financially free, having sufficient passive income to meet their expenses in li...
Reader says: Good morning AK! I am your avid follower since I attended the Tea with AK session some time back. Have started my retiremen...
30 & 32 Tuas West Road This was a recent chat with a reader: Reader: http://www.commercialguru.com.sg/property-management-news/20...
"What is the interest rate risk of REIT investments? Interest rates only represent a portion of the overall equation." Time fl...
Hi AK: I am currently 37 years old. I am working towards the target of hitting my CPF mininum sum by the age of 40. The current b...