How to begin your investment journey?

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Investing is a journey, not a day trip, so we need to prepare ourselves for the long haul. In our previous article, ‘What are REITs? Are they just for retirees?’, we covered some key characteristics of a REIT. In this article, we will be sharing how to start investing. Here are some questions individuals should ask themselves before investing:

  • Have I already set aside a rainy-day fund? (About six months’ worth of living expenses is a good gauge.)
  • Am I making my money work hard enough for me to beat inflation?
  • What is my investment horizon; can I set aside some money to invest?

Investing should not be a daunting affair or complex matter. In this article, we want to provide some easy steps on how to start investing.

 

Open either a CDP account or custodian account

If you are located in Singapore, you need either a Central Depository (CDP) account or Custodian account before you can invest.

A CDP account, which is operated by the Singapore Exchange (SGX), acts as a safe for all your stocks and bonds purchased. Every time you invest in stocks and bonds, they are deposited into your personal CDP account. The advantage of going for a CDP account is that you are the legal owner of the stock you purchase and will enjoy direct interaction with the company (e.g., receiving invites to the annual general meetings, entitlement to voting rights, etc). However, the CDP clearing fee and SGX trading fee are slightly higher compared to custodian fees.

 

Setting up a CDP account:

  1. Ensure you have a bank account with a local bank.
  2. Apply for your CDP account here. If you have these information and supporting documents ready on hand, the process will just take approximately 15 minutes.
  3. Once you have opened your CDP account, you can log in to the SGX Investor Portal via SingPass to view your stock portfolio and account statements.

Conversely, if you want to invest in overseas stocks, you will have to go for a custodian account instead, as the option of storing investments in CDP accounts is only applicable for Singapore-listed securities. Custodian fees tend to be lower than CDP and SGX clearing and trading fees, and custodians will help to pass on communication from the company to investors while representing them at AGMs and other investor meetings.

A number of brokerages today operate on a custodial basis. This means that the broker will own the shares on behalf of investors. Some examples of such brokers include moomoo, Tiger Brokers, Interactive Brokers, Saxo, Standard Chartered and FSMOne.

 

Open Your Brokerage Account

A brokerage account allows you to buy and sell investment products such as stocks, REITs, exchange-traded funds (ETFs) and certain bonds.

When selecting your brokerage, consider the following:

  • Market access
    Does it allow you to invest in foreign exchanges? If you are looking to invest in overseas stocks, this would be a key factor of consideration.
  • Trading /Commission fees
    How do they compare in terms of minimum fees and trading fees? Here is a helpful comparison of brokerage fees compiled by SingSaver. Also consider which brokerage type would suit your needs best – cash accounts, pre-funded accounts, or broker-assisted trading accounts?

Other factors to consider when choosing your brokerage account include the user-friendliness of the web/mobile app interface, availability of useful charting tools, speed of live information, and access to analyst reports and other investor education resources.

There is no limit to how many brokerage accounts you can have with different brokerage houses, so it is possible to test several before settling on one as your primary account.

In the next article, we will discuss the importance of portfolio diversification, and how you can go about doing so.

Sources:

 

Disclaimer: This article is for informational purposes only and shall not be construed as financial advice or an offer, invitation or solicitation of any offer to purchase or subscribe for any securities of Manulife US REIT in Singapore or any other jurisdiction nor should it or any part of it form the basis of, or be relied upon in connection with, any contract or commitment whatsoever. You should always do your due diligence and seek professional advice before making any investment decisions. None of the information presented are intended to form the basis for any investment decision, and no specific recommendations are intended.  

 

This article first ran on Manulife US REIT’s thought leadership column, Viewpoints, which publishes regular content on the U.S. economy and the office sector. Follow MUST on LinkedIn for all the latest updates!

 

 

Kenny Loh is an Associate Wealth Advisory Director and REITs Specialist of Singapore’s top Independent Financial Advisor. He helps clients construct diversified portfolios consisting of different asset classes from REITs, Equities, Bonds, ETFs, Unit Trusts, Private Equity, Alternative Investments, Digital Assets and Fixed Maturity Funds to achieve an optimal risk adjusted return. Kenny is also a CERTIFIED FINANCIAL PLANNER, SGX Academy REIT Trainer, Certified IBF Trainer of Associate REIT Investment Advisor (ARIA) and also invited speaker of REITs Symposium and Invest Fair.  

You can join my Telegram channel #REITirement – SREIT Singapore REIT Market Update and Retirement related news. https://t.me/REITirement

Continue ReadingHow to begin your investment journey?

Are REITs just for retirees?

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In our previous article “What are REITs?”, we shared about the types of asset classes and geographical breakdown of REITs listed in Singapore. In this next article of our #MUSTExplains series, where we share about REITs, the U.S. economy and the office sector, we discuss the reasons why people invest in REITs, and some risks to consider.

REITs may not be as exciting as tech stocks and cryptocurrencies, but here are four popular reasons why investors hold them :

  • Cost-effective way to invest in real estate: Direct property investment is more capital intensive and illiquid, while investing in REITs is more affordable and enables investors to grow their capital in a shorter period of time. It is also more liquid as investors can buy or sell units in a listed REIT on the stock exchange. Real estate is also known to be a hedge against inflation as their prices/rentals increase with inflation.
  • Total return investments: REITs typically provide high dividends and have the potential for moderate, long-term capital appreciation. Long-term total returns of REITs tend to be similar to those of value stocks and exceed the returns of banks’ fixed deposits and lower risk bonds.
  • Stable income stream: As REITs are required to distribute a minimum 90% of their income, their distribution yields tend to be higher than stocks or fixed deposits. SREITs average ~6% in dividend yields and have continued to generate substantial, stable yields through a variety of market conditions. This is why they are preferred by retirement savers and retirees who seek certainty and stability in their returns.
  • Diversification: The returns of REITs typically have a lower correlation with the returns of other equities and fixed-income investments. Investing in REITs thus helps to reduce a portfolio’s overall volatility and improve its returns for a given level of risk.

 

As with all investments, here are some possible risks when investing in REITs:

  • Market risk: REITs are traded on the stock exchange and their prices are subject to supply and demand conditions. Their prices generally reflect investors’ confidence in the economy, property market and interest rate outlook, among other factors.
  • Income risk: Many factors can affect a REIT’s rental income – for instance, when tenants renew at lower rentals or vacate their space. Therefore, look for stable occupancies, positive rental reversions, and contractual lock-ins of rental rates and other clauses in a REIT’s tenancy agreements to ensure income stability.
  • Leverage risk: If a REIT’s leverage limit approaches too close to the regulatory limit of 50%, it will limit the REIT’s financial flexibility to raise more capital through debt. Furthermore, additional expenses of borrowing such as interest payments and fees incurred in connection with the borrowing will reduce the money available for distribution to unitholders.
  • Refinancing risk: REITs may face higher refinancing costs when loans are due for renewal, or they may be unable to secure refinancing and resort to selling off properties if these assets are mortgaged under the loan. These risks could affect the unit price and income distribution of a REIT.

 

REIT Structure

Here’s a diagram of a typical REIT structure.

Besides the REIT vehicle, there are three external parties working in relation to it. All three parties are paid fees for their services.They are the:

  • i.     Trustee – Responsible for the ownership and safe custody of the REIT’s assets, they act on behalf of unitholders to ensure the REIT Manager complies with the law and performs its duties as laid out in the Trust Deed.
  • ii.    REIT Manager – It manages the REIT in the best interests of unitholders, which includes setting the REIT’s strategic direction, managing assets and liabilities, as well as making recommendations to the Trustee on the acquisition, divestment and enhancement of assets according to the REIT’s investment mandate.
  • iii.   Property Manager – It manages the day-to-day operations and maintenance at the respective properties.

 

Most SREITs also have Sponsors – typically but not necessarily property developers which inject properties into the REIT during listing. Many Sponsors continue to support the growth of the REITs by offering them rights to acquire a future pipeline of properties. Sponsors are often also major unitholders of the REITs they sponsor.

In the next article, we will discuss how to start investing in REITs and stocks. Stay tuned!

Sources:

 

Disclaimer: This article is for informational purposes only and shall not be construed as financial advice or an offer, invitation or solicitation of any offer to purchase or subscribe for any securities of Manulife US REIT in Singapore or any other jurisdiction nor should it or any part of it form the basis of, or be relied upon in connection with, any contract or commitment whatsoever. You should always do your due diligence and seek professional advice before making any investment decisions. None of the information presented are intended to form the basis for any investment decision, and no specific recommendations are intended.

 

This article first ran on Manulife US REIT’s thought leadership column, Viewpoints, which publishes regular content on the U.S. economy and the office sector. Follow MUST on LinkedIn for all the latest updates!

 

Kenny Loh is an Associate Wealth Advisory Director and REITs Specialist of Singapore’s top Independent Financial Advisor. He helps clients construct diversified portfolios consisting of different asset classes from REITs, Equities, Bonds, ETFs, Unit Trusts, Private Equity, Alternative Investments, Digital Assets and Fixed Maturity Funds to achieve an optimal risk adjusted return. Kenny is also a CERTIFIED FINANCIAL PLANNER, SGX Academy REIT Trainer, Certified IBF Trainer of Associate REIT Investment Advisor (ARIA) and also invited speaker of REITs Symposium and Invest Fair.  

You can join my Telegram channel #REITirement – SREIT Singapore REIT Market Update and Retirement related news. https://t.me/REITirement

Continue ReadingAre REITs just for retirees?

What are REITs?

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REIT is short for ‘real estate investment trust’. In Singapore, REITs are a type of professionally managed collective investment scheme which acquires, owns and finances income-generating real estate.

Because of the stable stream of contractual rents they collect from tenants and their requirement to distribute a minimum 90% of their earnings, REITs provide investors with a regular income stream. They also offer investors potential long-term capital appreciation and an affordable means of investing in a wide range of real estate assets.

For REITs listed in Singapore (called SREITs), at least 75% of their total assets must be invested in income-producing real estate. SREITs may also hold real estate in more than one asset class, and either in one country or multiple countries. Increasingly, many SREITs have ventured abroad in search of higher risk-adjusted returns and greater diversification.

The table below shows the types of asset classes and geographical breakdown of SREITs.

Overview on the different REIT sectors and Geographical Breakdown of S-REITs.

Since the first SREIT listing in 2002, Singapore has transformed into a global REIT hub with 43 REITs and property trusts, boasting an estimated market capitalisation of S$111 billion as at May 31, 2022. Out of the 43, more than two-fifths are offshore REITs with 100% of their properties outside of Singapore, and only ~10% hold 100% Singapore assets.

 
 

In the next article, we will share some popular reasons why people invest in REITs as well as things to note when doing so. Stay tuned!

 

Sources:
SGX Research, “Chartbook: SREITs & Property Trusts“, 12 May 2022
MoneySense.gov.sg, “Understanding real estate investment trusts (REITS)”, 29 Oct 2018
‘Reits to Riches’ by Tam Ging Wien, 2017

 

Disclaimer: This article is for informational purposes only and shall not be construed as financial advice or an offer, invitation or solicitation of any offer to purchase or subscribe for any securities of Manulife US REIT in Singapore or any other jurisdiction nor should it or any part of it form the basis of, or be relied upon in connection with, any contract or commitment whatsoever. You should always do your due diligence and seek professional advice before making any investment decisions. None of the information presented are intended to form the basis for any investment decision, and no specific recommendations are intended.

 

This article first ran on Manulife US REIT’s thought leadership column, Viewpoints, which publishes regular content on the U.S. economy and the office sector. Follow MUST on LinkedIn for all the latest updates!

 

Kenny Loh is an Associate Wealth Advisory Director and REITs Specialist of Singapore’s top Independent Financial Advisor. He helps clients construct diversified portfolios consisting of different asset classes from REITs, Equities, Bonds, ETFs, Unit Trusts, Private Equity, Alternative Investments, Digital Assets and Fixed Maturity Funds to achieve an optimal risk adjusted return. Kenny is also a CERTIFIED FINANCIAL PLANNER, SGX Academy REIT Trainer, Certified IBF Trainer of Associate REIT Investment Advisor (ARIA) and also invited speaker of REITs Symposium and Invest Fair.  

You can join my Telegram channel #REITirement – SREIT Singapore REIT Market Update and Retirement related news. https://t.me/REITirement

Continue ReadingWhat are REITs?