S-REITs: Are we asking the right questions? (UPDATED)

A friend asked me if S-REITs are bad investments now? Why are people selling down S-REITs? 

He is somewhat concerned about his investments in S-REITs and was hoping that I will tell him what to do, I guess.

Well, I cannot and will not tell him what to do. He has to decide for himself. 

Before he can decide for himself, he has to understand his motivations for being invested in S-REITs in the first instance.





If his motivation was for income, then, ask if S-REITs still do a good job of providing regular income. 

If his motivation was for capital gain, then, he should have set a target and perhaps sold his investments when prices declined by 10% from the top, for example.

People get confused when they don't know what they want.

For me, my remaining investment in S-REITs is for income. 

Apart from Saizen REIT which could see income distribution in S$ affected by the much weaker JPY, I do not see income being affected negatively in the other S-REITs I am vested in. 

Well, at least not in the next few quarters.







So, why are people selling down S-REITs? 

There are many explanations and there has been much said about how sensitive S-REITs are to interest rates. 

An increase in interest rates will be bad for S-REITs in more ways than one. 

This is all true. 

However, we have to question also if an increase in interest rate is imminent and also if S-REITs will be immediately affected. 

Personally, I do not think so.





Of course, Mr. Market does not care what I think. This is a good thing. 

As Mr. Market goes into a manic depression, he is going to offer S-REITs at lower and lower prices. 

This means distribution yields will go higher and higher, everything else remaining equal.

Could we see S-REITs trading below NAVs once again? I have no idea but it could happen. 





If it should happen, we would have a chance to buy productive real estate at a discount once again. Guess what would I do then?

As S-REITs' unit prices climbed higher, I warned that we should be careful and not be too optimistic. 

Now, as S-REITs' unit prices decline, I will remind everyone not to be too pessimistic.

Always ask the right questions and we will know what to do.






Related posts:
1. Wealth creation in the stock market.
2. Never lose money in S-REITs?
3. Be cautious when climbing the S-REIT tree.

Investing in the stock market makes you a gambler!

A friend told me that he found it hard to explain to his parents that investing in the stock market was not gambling. 

They were always telling him to stop gambling in the stock market. 

To that, I said that his parents were right. 

He was shocked.

Why did I say that?

Well, all of us have our own perceptions and, to us, our perception is reality. 

Remember the story about the frog and the fish which shared a pond? 

When the frog told the fish that there was a different world outside the pond, the fish didn't believe the frog.

So, I told my friend that his folks were probably not able to understand concepts they had never heard of in their lives unless we put across the ideas in a way that they could relate to in everyday life.




I came up with this:

Try telling them that many rich people got rich through having successful businesses. 

I think they can understand this. 

Just give them some local examples which they are familiar with. Breadtalk and Old Chang Kee, perhaps.

So, if they want to be rich, they could start businesses too and hope to succeed. 

However, it is probably very risky and most of us do not have the capital, the know how or even the inclination to start our own businesses.




Of course, they could always be partners in a business venture and hope that the managing partners are capable enough to succeed and honest enough to share the fruits later on.

Now, at this point, tell them that the stock market is filled with businesses which they can become "partners" in. 

They just have to pick the right businesses. 

Right businesses? 

Yes, the ones with capable and honest management who are likely to succeed and share the fruits with them.




Well, my friend talked to his parents again and told me that although his parents are still sceptical about the stock market, they agreed that what he is doing seems less dicey compared to gambling. 

Of course, there is more to investing than what has been said but it is a start and my friend is happy enough.

If you find yourself in the same boat as my friend, you might want to give this approach a try. 

It could work for you too.

Related post:
Wealth creation in the stock market.