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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.
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.
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