Investment choices cover a wide range of asset classes: Bonds, Equities, Unit Trusts, Exchange Traded Funds (ETF), Real Estate Investment Trusts (REITs), Options and many others.
This module introduces investors to the fundamentals of REIT investing.
REITs generally have moderate to high risk and potential returns.
For the purposes of this module, it is also assumed that participants have a basic understanding of investments in general before investing in REITs. We strongly recommend that participants in this module go through our foundation module on investing or a similar foundation modules.
As with any other investment product, investors should also take time to understand the product and consider whether it is suitable for them based on their risk profile, time horizon and investment objectives.
Real Estate Investment Trusts (REITs) are instruments that offer investors the opportunity to invest in a professionally managed portfolio of real estate, through the purchase of a publicly-traded investment product. Individuals invest by purchasing units of the REIT.
The investment objective of REITs is to provide unit holders with distribution income, usually from rental income, and capital gains from the appreciation of the REIT price and/ or the profitable sale of real estate assets. Distribution income is similar in some ways to the dividend income you may get from shares.
REITs are collective investment schemes that invest in a portfolio of income generating real estate assets such as shopping malls, warehouses, offices, hotels or serviced-apartments; usually established with a view to generating income for unit holders.
As an investor, you would like to see higher income distribution or capital gains from investing in the REITs just as you would in a stock. To achieve this, a REIT typically uses the following strategies:
Consider if the REIT’s investment objectives suit your personal risk appetite and investment time horizon.
Always read up on the REITs you are considering. REITs can have different structures, geographical or sector focus, and some REITs may carry more risk, such as political and regulatory risk, than others. A REIT with all its properties located in Singapore can carry very different risk from another REIT with its properties located in an overseas country. Make sure you understand the political and regulatory risks of the countries that your REIT invests in. Read the “Investment Approach” and “Risks” portions of your prospectus for information on the various risks of the specific REIT you intend to invest in.
The unique characteristics and features of each REIT, such as its portfolio of assets and focus on generating income as regularly as possible, can translate into benefits for investors.
The risks associated with a REIT investment vary and depend on the unique characteristics and features of each REIT, as well as the geographical location of the investments. Do not simply look at the expected yield, but also consider the concentration, quality and length of leases of the underlying properties.
Here are some quiz questions that test your understanding of REIT investing.
Here are some important questions for discussion.
The MoneySENSE-Singapore Polytechnic Institute for Financial Literacy is a collaboration between MoneySENSE, the national financial education programme in Singapore and Singapore Polytechnic.
MoneySENSE is spearheaded by the public-sector Financial Education Steering Committee which comprises representatives from the Ministry of Health, Ministry of Social and Family Development, Ministry of Education, Ministry of Manpower, Central Provident Fund Board, Monetary Authority of Singapore, National Library Board and People’s Association.
Our financial education courses cover basic money management, financial planning and investment know-how.
Peggy Chan, Financial Literacy Trainer, Institute for Financial Literacy
Peggy has 8 years of experience in the financial services industry, helping clients understand their financial needs, objectives and risk tolerance as well as reviewing company policies and procedures to ensure compliance. She was also an adjunct lecturer with a Polytechnic, teaching insurance and retirement planning subjects.
Prior to joining the financial services sector, Peggy was working in the information technology sector for 13 years, first in a government agency and subsequently served as a Senior Systems Analyst in an international bank.
She is a Certified Financial Planner, which is a professional certification specific to retirement planning and wealth accumulation in addition to overall financial planning.
Peggy has a Masters of Science, majoring in Network Management. She also holds other industry certification in M5, M8, M8A, M9 and HI.