For those of you who are just starting out, I can understand that the sheer amount of work required to build your REIT investment portfolio can be a very daunting one.
As the saying from American author and inspirational speaker Simon Sinek goes, ‘The hardest part is starting. Once you get that out of the way, you’ll find the rest of the journey much easier.’
So, if you let the hard work needed deter you from starting, you will never get there.
To help you along, here are 3 things you need to know to help you build your REIT investment portfolio (I’m sharing based on my experiences here, and I hope you will find them useful):
1. Do Your Research
Never invest in any REIT just because someone you know has investments in it – I like to think of it as ‘agreeing to spend the rest of your life with someone when you meet him/her for the very first time.’
You see, when it comes to investing, everyone have different objectives (on what they want from their investing efforts), as well as risk appetite – very much like how we as humans are different from one another in some aspects.
Instead of diving right in to any REITs the moment you hear about it, I strongly recommend you to spend some time to study and get a good understanding about it – by studying its annual report (which you can find via its ‘investors relations’ page.)
Personally, I will study a REIT’s annual report over the last 5 years (at least) to get a good understanding about its financial performances, its plans ahead, as well as to identify some potential risks that it may face. With this information at hand, it allows me to make a much better investment decision.
2. Diversify Your Portfolio
I understand some retail investors prefer to concentrate their money on just a few REITs, which is perfectly fine, because like I have mentioned in the previous section, everyone is different.
However, I prefer to be diversified, for the reason that as much as we do our own due diligence prior to making any investment decisions, but as the word ‘investment’ goes, there still remains a certain level of risk. And by having some level of diversification, should one of the companies we have investments in turns sour, then we will not suffer from heavy losses.
When it comes to my preferred number of companies to have in my investment portfolio, my preference is between the range of 12 to 15 – not to few to have my portfolio being too concentrated, and at the same time, not too many to the extent I have a problem keeping track on the latest updates by each and every single one of them (as a retail investor, apart from studying past years’ annual reports to get a good understanding about a REIT prior to investing in it, I will also study their quarterly and annual reports whenever they are made available to allow me to stay abreast of its latest developments, and also to identify any potential ‘red flags’.)
3. Remain Patient
One of the biggest worries that most retail investors have is the plunge in unit prices of the REITs they are invested in.
But the thing is this, unit price volatility is something we have no control over, as they move based on a range of factors. However, if the REIT continues to report a stable financial performance, and there are no signs of potential ‘red flags’, then as retail investors, we should make use of the unit price volatility to buy more units to bring down our average invested price, and wait for its eventual recovery.
Especially when the REIT continues to remain fundamentally sound, it is only a matter of time when its unit price recover, and scale new heights.
Patience really is a virtue of all retail investors, and something you need to have as well if you want to have any success in your investment portfolio building efforts.
No doubt there is a certain level of risk when it comes to investing, but when you follow the advices presented above – which includes taking time to get some understanding of a particular REIT prior to investing in it, diversifying your investment portfolio with 12-15 different companies, and also staying abreast with its latest developments by studying its quarterly and annual reports, you can cut the risk significantly.
For those of you who are new to investing, I certainly hope you will find this post useful.
If you like a step-by-step guide on the nuts and bolts to building a REIT portfolio that can provide the income for your retirement in the future, you can check out this book which I have authored titled ‘Building Your REIT-irement Portfolio’, where I will be sharing with you the exact things I look at when evaluating a particular REIT, how I monitor the REITs I have investments in, and spot potential ‘red flags’, etc. In this book, you will also find a chapter where you will find answers to burning questions by retail investors as a far as REIT investing is concerned.
You can find out more about the book, and if you like, you can grab a digital copy (in PDF format, which you can download immediately after payment), or a physical copy (which will be mailed to the address you specify) here.
Are You Worried about Not Having Enough Money for Retirement?
You're not alone. According to the OCBC Financial Wellness Index, only 62% of people in their 20s and 56% of people in their 30s are confident that they will have enough money to retire.
But there is still time to take action. One way to ensure that you have a comfortable retirement is to invest in real estate investment trusts (REITs).
In 'Building Your REIT-irement Portfolio' which I've authored, you will learn everything you need to know to build a successful REIT investment portfolio, including a list of 9 things to look at to determine whether a REIT is worthy of your investment, 1 simple method to help you maximise your returns from your REIT investment, 4 signs of 'red flags' to look out for and what you can do as a shareholder, and more!
You can find out more about the book, and grab your copy (ebook or physical book) here...