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Financial planning series Part 2: REITs, a smarter form of investment

Updated 21 Aug 2017 – By Loanstreet


REIT stands for Real Estate Investment Trust. It runs on a mechanism that is similar to mutual funds but instead of investing in stocks, REITs invests in real estate, either residential or commercial. This allows you to indirectly invest in properties.

There are several types of REITs in Malaysia. Depending on which REIT you choose to buy, you will be able to own a share of apartments, hotels, hospitals, office buildings, shopping malls, and warehouses.

Real Estate Investment Trust (REIT) is an alternative investment that has been around since the 1960s in the United States. However it only started becoming popular in various countries at the turn of the millennium, and was only introduced in Malaysia in 2005.

Buying REITs is a good way to start building your portfolio as they allow you to own a diverse range of properties without having to be burdened with the huge loan repayments. Entry costs for REITs are fairly low as most REITs on Bursa Malaysia are priced around a Ringgit a share.

Your minimum buy-in would be around RM100 (RM1 x 100 shares). Put together the fact that they are very liquid assets makes them an appealing investment for first time investors.

This is a dividend paying instrument that distributes a majority of its income. Although there is no law, Malaysian REITs generally distribute 90% of its income. Historically, REITs generate an average return of 6% – 8% per annum.

Furthermore, REITs are generally less volatile than stocks and bonds, thus making them an attractive security for seasoned investors as well. In addition to conventional REITs, there are Islamic REITs, thus catering to a wide range of investors.

Before you buy into REITs, ensure that you do proper research. Consult an independent financial advisor to ensure you buy a REIT that fits your investment and risk plan.

You might get some funds to invest in REITs if you have a good financial planning. Read our articles and learn how to be your own financial planner. Here are also some articles regarding bankruptcy. To have a better understanding on financial planning, you can read our articles on how to invest RM 10,000 wiselyhow to avoid overspending and also how to invest one million ringgit in properties.

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