5 Reasons Why you should include REIT in your retirement portfolio

One of the common questions I always receive in my seminars is what type of asset classes are suitable in our retirement portfolio. Is it endowment, annuity, universal life, bonds, equities, physical properties, land banking, hedge funds, etc. Physical properties is one of the most favorite asset classes when come to investing in Singapore. However, there are some disadvantages on physical properties investing when we are entering into our retirement age.

REIT stands for Real Estate Investment Trust and can be served as alternative to physical property investing. I will share here 5 reasons to include REIT as alternative investment to physical real estate in your retirement portfolio.

  1. Liquidity – during our retirement age, we need liquidity to pay for our living expense and for any unforeseen medical expenses. The flexibility and easiness to liquidate our investment assets to cash is extremely important. For retirees who are holding many physical real estate may want to consider to REIT as alternate to physical real estate for their retirement years as it can be liquidated immediately and get the cash back within 5 working days.
  2. Tax free and Lower total cost – there are many tax advantages by investing in REIT because the dividends generated and capital gain from REIT are not taxable. However, there are BSD, ABSD, SSD, Property Tax, Rental Income Tax by investing in physical real estate. In addition, investors still have to pay for hefty legal fee and agent commission, fire insurance cost, repairs and maintenance cost. No legal fee is payable and the brokerage commission is much lower for investing in REIT.
  3. High yield – REIT offers 5-9% annual dividend compared to physical real estate which generate between 2-5% depends on the real estate types. The REIT manager always look for yield accretive acquisition and go through a series of AEI (Asset Enhancement Initiative) of the portfolio to increase the distribution payout every year.
  4. Diversification – REIT offers better diversification in terms of number of properties, property types, tenant based, geographical and sectors compared to landlord who can only own one or two residential properties with the resources available. Investors are able to have a well balanced and diversified portfolio with a little as a few thousands dollars of the investment capital for retirement.
  5. Hassle free – As the landlord of the investment properties, he or she has to deal with the sourcing of properties, negotiation of the Sales & Purchase Agreement, apply and service the bank loan, collecting rental, managing the tenants, dealing with the property maintenance, etc. However, there is no such hassles when investing in REIT as there are professional managers engaged to deal with all these tasks.

In summary, people should enjoy their retirement years by fully optimising their investment to generate the monthly passive income. Retirees should enjoy their retirement instead of getting worried about their investment and also deal with all such hassles. REIT is an asset class which retiree should include into their investment portfolio for their retirement.

 

Kenny Loh is a Senior Consultant from Singapore Largest Independent Financial Advisor helping clients in building an investment portfolio for retirement. He specialised in Singapore REIT and has been conducting REIT investing courses for past 6 years. 

He won the Top Investment Asset Under Advisory (AUA ) 2nd runner up in 2017 and currently managing million of AUA. He also won the Best Practice Consultant Award in 2017. He can be contacted through kennyloh@fapl.sg if you would like his help to personalise a REIT portfolio for your retirement.

Are you SABOing your Investment for Retirement?

It is a very unfortunate event that investors lost their hard earned money and retirement fund with Six Capital.

Angry investors file police reports against fintech firm SixCapital

What can we as the retail investors learn from this incident?

Let’s use the SABO model to analyse this incident. By the way, this SABO is NOT the Singlish of “Sabotage”.

SABO stands for S (Suitability), A (Affordability), B(Benefit) and O(Objective).

 

Objective

Before we invest, we need to have a very clear objective in mind on why we need to invest, how long is our investment horizon, what is our risk profile, how much time we can allocate to monitor our investment portfolio, etc.. Setting the right objective is very important because it serves as our lighthouse to identify, select and understand the right asset classes to meet our objective.

 

Suitability

Once we are clear with the objective, the next step is to select the asset classes which are suitable to our risk appetite, our life style, available time to do our homework and investment horizon.

Examples of the wrong match of one life style, personality, risk appetite with wrong asset classes and investment strategy:

  • a busy executive scalps forex every night after work;
  • a retiree invests his / her majority of retirement fund in land banking;
  • a person who dislikes numbers trades Option
  • a housewife who does not have computer knowledge trades crytocurrency

It is not sustainable with all the above examples due to the mismatch.

If you are struggling with your current investment, it is strongly suggested you do a review immediately on your current investment portfolio or your trading strategy, before you commit more time and more money doing something which is not suitable to you.

The following questions the investors have to ask to see whether the investment is suitable to them :

  • How the investment strategy can give 18% per year?
  • What are the risks in this investment?
  • What is the worst case scenario?
  • How volatile is this investment?
  • How quickly if the investors want to redeem their investment? Is there a lock in period? Are there any early redemption and other charges?

 

 

Affordability

  • Can we afford to lose all our investment if we make mistake investing in the wrong asset classes or instrument?
  • Can we afford to ride through the market volatility if there is a big correction or black swan event?
  • Can we afford to take more risk for higher return?
  • Can we afford to be ignorant, DIY and listen to tips when come to investing?
  • Can we afford to get professional advice to help building the safe and diversified portfolio?

 

Benefits

  • Is the return of the  investment meet my expectation?
  • Is my expectation realistic?
  • Is it worth to take more risk for additional return?
  • Is my investment liquid and sell anytime when I need money?
  • Can the investment give me Peace of Mind and give me a “Sleep Well” factor?

 

I am rather concern with this statement “A few retirees indicated that they had poured in significant retirement sums. One lady was the age of my mother. She said that she was going to the temple to pray.”

My recommendation to retiree on their retirement fund:

  • First priority is Capital Preservation, Not Chasing for Return because you can’t afford to lose your retirement fund unless you can replenish your capital easily if you lose all of them.
  • Look for investments which are less volatile and pay consistent dividend like Bond or REITs.
  • Nothing is guaranteed in this investment world. Please don’t believe in those marketing materials indicate “Guaranteed Return”, etc. Countries, Banks, Insurance companies can all go bankrupt.. so, where does the guarantee come from?
  • Do have a diversified investment portfolio and Manage the Risk… Don’t put all your eggs into one basket. You cannot afford to make any costly mistake at retirement age. One big mistake may wipe out all your retirement fund.

 

If you need an Independent Third Party to have an unbiased view on  your current investment portfolio (Fee based), you can contact me through email kennyloh@fapl.sg.

 

Scope of the Investment Portfolio Review

  • Identify your Investment Objective
  • Risk Profile Assessment
  • Strength and Weakness of current portfolio
  • Recommendation

 

Kenny Loh

Singapore REIT Price / NAV Range Chart Sep-2018

Original post from http://mystocksinvesting.com

Singapore REIT Price / NAV Range Chart base on Sep 2, 2018 Singapore REITs Table.

 

See last Singapore REITs Price/NAV here to see the changes.

Disclaimer: This chart is NOT a recommendation to buy or sell. Do NOT use it if you don’t understand how to interpret it.

 

Check below on other events:

http://mystocksinvesting.com/course/singapore-reits-investing/REITs Investing Course 

http://mystocksinvesting.com/course/private-portfolio-review/REITs Portfolio Advisory 

http://mystocksinvesting.com/events/