What if you are looking for ways to diversify your investment portfolio, which class of asset would you consider adding to your portfolio "basket"? If your portfolio is composed mainly of bonds and stocks, investing in REIT or Real Estate Investment Trust " an investment company that invests in real estate including commercial properties " would be a good option to consider.
REITs add diversification to an investor's portfolio because the cost of real estate properties don't move in the same direction with stock market. Thus when the overall stock market goes down, investments in real estate properties will not be affected.
According to a study, the relationship of REIT returns with those of stocks and bonds has declined appreciably in the last 30 years. Plainly put, the price trend of real estate is steadily going in an opposite direction from that of bonds.
Here are two reasons why a mixture of stocks, bonds and real estate can help balance the portfolio.
Bonds are very susceptible to interest rate fluctuations, so the value of bonds declines when interest rates increase. But in REIT, this isn't the case because real estate properties have fixed mortgage.
The value of bonds is fixed while REIT shares are not. The bonds that are bought at $400 will be returned to the buyer at maturity, with interest. In REIT, interest can be earned through dividends. But since REITs can increase profits by increasing rental costs, or purchasing and selling properties, the price of REIT shares can increase like any normal stock.
Examples of REIT include office buildings and self-storage. While many investors would think of self-storage as far less appealing and less dynamic compared to other forms of real estate investment trust, it can actually turn into a stable and resilient money making opportunity once economic occupancy is attained.
This is why investors in Singapore that are planning to diversify their portfolio can take advantage of this by investing in self storage in Singapore. They can do this by converting a garage into a storage facility or by buying a self storage Singapore real estate developers offer. Individual investors can also consider franchising a storage space Singapore company offers.
REITs add diversification to an investor's portfolio because the cost of real estate properties don't move in the same direction with stock market. Thus when the overall stock market goes down, investments in real estate properties will not be affected.
According to a study, the relationship of REIT returns with those of stocks and bonds has declined appreciably in the last 30 years. Plainly put, the price trend of real estate is steadily going in an opposite direction from that of bonds.
Here are two reasons why a mixture of stocks, bonds and real estate can help balance the portfolio.
Bonds are very susceptible to interest rate fluctuations, so the value of bonds declines when interest rates increase. But in REIT, this isn't the case because real estate properties have fixed mortgage.
The value of bonds is fixed while REIT shares are not. The bonds that are bought at $400 will be returned to the buyer at maturity, with interest. In REIT, interest can be earned through dividends. But since REITs can increase profits by increasing rental costs, or purchasing and selling properties, the price of REIT shares can increase like any normal stock.
Examples of REIT include office buildings and self-storage. While many investors would think of self-storage as far less appealing and less dynamic compared to other forms of real estate investment trust, it can actually turn into a stable and resilient money making opportunity once economic occupancy is attained.
This is why investors in Singapore that are planning to diversify their portfolio can take advantage of this by investing in self storage in Singapore. They can do this by converting a garage into a storage facility or by buying a self storage Singapore real estate developers offer. Individual investors can also consider franchising a storage space Singapore company offers.
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