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Dumping all my investments in REITs.

Tuesday, March 20, 2018

Reader says...
I recently started buying REITs and following online blogs online.

I do my own diligence which I think is sound but cannot help but be worried when I see negative things about REITs being posted.


Classic consumer economics behaviour from me cos scared Liao lol.








Anyway, I know there is a difference between Traders and investors.


There is one particular trader that says REITs and dividend stocks will suffer soon.


Should I be concerned? Because my investment strategy is buy and hold.








AK says...
It depends on what you are looking for and if your investments can deliver.

In an inflationary environment, (interest rates should go up and, naturally,) bonds will suffer but we should not mix up bonds and REITs. They are not the same thing.


Bond holders get paid a coupon and that is fixed. 


As interest rates rise, bond prices will fall (as Mr. Market expects a higher yield to buy those bonds and as the coupons are fixed, the bond prices must fall to give a higher yield).







Businesses and REITs have the ability to raise prices and that is what they usually do in an inflationary environment.


Invest in what we understand and disregard the noise.


When we buy bonds, we are money lenders. We charge interest for lending money.


When we invest in a business, we are partners and we share the ups and downs.









REITs remain a relevant tool for income investors but, to be fair, not all REITs are good investments.


Regular readers know that I have reduced my exposure to REITs but it is not for as simplistic a reason as interest rates are rising.



Rising interest rates alone is not strong enough a reason for me to sell down REITs.

Try not to be overly pessimistic nor overly optimistic. Try to be pragmatic.









Related posts:
1. Why bonds and which ones?
2. Largest investments updated.

17 comments:

Investminds said...

good advice AK. my portfolio is 100% reits and trusts. happy to collect the passive income and invest the DPUs for compounding. Stay calm and invest and seek opportunity when people are fearful.

victor lee said...

I think this Reader should not invest. He is not able to stomach price fluctuations and gets too easily influenced by any sort of opinion. He is likely to make bad decisions and lose money

Bruce said...

i have a bit difficulty to understand the title "Dumping all my investments in REITs". does it mean the reader dump all his money into buying S-REITs, or does it mean AK is dump all his S-REITs investment?

AK71 said...

Hi IM,

Alamak. Who gave advice? Who? Who?

REITs and business trusts are a smaller part of my portfolio compared to a few years ago but this is mostly due to involuntary action. ;p

AK71 said...

Hi Vic,

To be fair, this reader was not the only one to write to me regarding this matter.

The influencer they follow is very influential.

AK71 said...

Hi Bruce,

Don't judge a book by its cover.

Don't judge a blog by its title. ;p

Investminds said...

hi AK, no one provide advice. I did my homework using FA, TA and margin of safety. not all reits and trusts are good counters.i usually look at the biz model, future growth strategy, debt,cash flow and management.

AK71 said...

Hi IM,

Always important to do own due diligence.

Good on you. :)

Investminds said...

Hi AK, your blog inspire me to learn investing. Thanks for sharing your knowledge.

AK71 said...

Hi IM,

I am glad and I am still learning too. ;)

lim wee ee said...

Aims amp reit recently posted 0.71 cents for the month of December 2017 after the share placement. This seemed to be much lower than before the placement due to the shares dilution.
Most appreciated if you can share your views on this.
Thank you and regards.

lim wee ee said...

Appreciate your views on the recent dpu by Aims amp reit. Dpu of 0.71 cents declared forDec 2017 after the placement shares was completed. It seemed to be much lower after the shares dilution. Any concerns on future dpu ?
Thanks and best regards.

AK71 said...

Hi Wee Ee,

You might have forgotten an advanced distribution made earlier in the year prior to the placement.

1.91c + 0.71c = 2.62c

AK71 said...

Reader says:
A lot of people are rather bearish on reits. I am 50 this year and I am looking at growing my passive income through reits' dividends. I would like to know if it makes sense to buy some good reits that gives you more than 7% yield, with gearing ratio of less than 35% and below NAV, preferably non retail. Maybe Fraser L&T, hospitality with global presence or hospital. What do you think, any advice?


AK says:
Alamak. I also blur. ๐Ÿ˜›

HC Ong said...

Hi AK,

I am rather new to the reits scene and have invested in some. I have done my homework diligently to evaluate the reits. However, I came across this post "https://donovan-ang.blogspot.sg/2018/05/the-reits-super-sell-off-and-stocks-and.html" and it seems to make sense together with TA. What views do you have on his post?

-HC

AK71 said...

Hi HC,

We cannot always be right.

I have made mistakes before and so has he, I am sure.

I will just say that everyone is entitled to his or her opinions.

You just have to do your own due diligence and draw your own conclusions.

AK71 said...

Reader says...
Hi AK, now there's talk on REITs potentially going into a down trend given the macro environment, how about new recent REITs like oue commercial, how should we evaluate these REITs that do not have enough historical data to compare against?

AK says...
Hmmm... Frankly, there isn't any REIT which I see as attractively priced now... ๐Ÿ˜‰

Reader says...
Okay play game better ๐Ÿ˜‚

AK says...
ahbaden ... ๐Ÿ˜›

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