- start investing in REITs
- Basic understanding of investing
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.
- Those interested in investing
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.
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:
- Acquisition / Property Rebalancing Strategy
- Rental increase
- Asset Enhancement and New Property Development Strategy
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 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.