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Last updated: December 2018

Young Investors

Dissecting Investment Vehicles – Final

Monday, 16 September 2013

Dissecting Investment Vehicles – 5

We look at the more expensive investments in the final part of the Dissecting Investment Vehicles miniseries – Property Investment, and a much more affordable Fund based off Properties – REIT.

Property

Property Investment is the purchase of either a piece of land, a residential, commercial, or even industrial unit.  The price will generally increase over the years.  The Returns are generally good and steady, actual Risk Level and Returns depends on the location of the property, property type, future development of the area.

Property Investment has the largest Initial Capital Requirements compared to other investment vehicles, and the buy and sell process takes a longer time.  It also has the lowest Liquidity among all investment vehicles as there are many procedures to the sale and purchase of property, the many considerations buyers have, and also the large funds required.

Real Estate Investment Trust (REIT)

A REIT is a fund that is traded in an Exchange like a Stock/Share, and works like a Mutual Fund where it pools funds from investors and is managed by professional Fund Managers.  REITs are normally managed by a Private Limited REIT Company, where it acts as the Fund Manager for the REIT.  Investors in REITs can enjoy the capital gains on properties without the headache of property management.

The pooled funds are invested in properties such as shopping centers, hotels, apartments, office buildings etc.  The "unit" you hold represents the ownership, hence the cost is lower than buying the whole property.

A REIT's portfolio is usually diversified, hence the lower Risk Level and Returns compared to direct investment in properties.  REITs are also listed and traded on the Exchange, and are thus as Liquid as Stocks.  The Initial Capital Requirements are like Stocks, where the minimum purchase is 1 Board Lot (100 Units/Shares).

By the Young Investors Team