14-04-2014, 08:25 AM
Hello all
Would like to ask for some advice/opinion regarding my current situation.
I am quite deeply vested in Singapore REITs (about 65% of my net worth).
I have started accumulating about 5 years ago. At the start I mainly invested blindly based on advice of family/relatives, so I am not very familiar with my own investment, until recently.
Recently I started to pay more attention (mainly because I want to retire early), so I started reading books, websites, look at prices and so on.
What I noticed is that REIT has a rather steep drop in price since last May, due to the end of QE tapering talk and also the rise in 10 year SGS yield from about 1.5% to 2.5%.
From what I read, REITs yields usually maintain a "spread" over the risk-free rate (10 year SGS) which is the risk premium. So when SGS yield rise, REITs yield also rise by roughly the same amount, so REIT prices dropped quite drastically in the 2nd half of last year.
What worries me is that some people on the net (analysts, bloggers, etc) are saying that the 10 year SGS yield may rise more to stabilize at about 3.5%. I did some very rough calculations using excel, and I estimate that REIT prices may drop another 15-20% with another 1% price in bond yield (assuming that the risk free spread and DPU stays the same).
So it seems that now is a bad time to invest in REITs, and in fact it may be better to reduce holdings until the 10 year SGS yield stabilizes. So now I must decide what to do with the money if I liquidate some of my REITs.
Since interest rates are rising, I think it is also a bad idea to go into government or corporate bonds.
I think I should go into equities, but I lack experience for value investing right now. I read the posts on this forum with interest, but I think it is a long hard road to get the level of skills required to profit from value investing.
Instead, I am thinking of just buying the STI ETF whenever there is a dip (Like last Sep or this Feb).
I would like to hear your views on the following:
- Do you agree that REITs are likely to drop more? Is it advisable to liquidate part or all now while prices are still relatively high?
- Is it a good idea to invest a lot of money in a index fund like STI? Are there better alternatives for a casual investor?
Thanks!
Would like to ask for some advice/opinion regarding my current situation.
I am quite deeply vested in Singapore REITs (about 65% of my net worth).
I have started accumulating about 5 years ago. At the start I mainly invested blindly based on advice of family/relatives, so I am not very familiar with my own investment, until recently.
Recently I started to pay more attention (mainly because I want to retire early), so I started reading books, websites, look at prices and so on.
What I noticed is that REIT has a rather steep drop in price since last May, due to the end of QE tapering talk and also the rise in 10 year SGS yield from about 1.5% to 2.5%.
From what I read, REITs yields usually maintain a "spread" over the risk-free rate (10 year SGS) which is the risk premium. So when SGS yield rise, REITs yield also rise by roughly the same amount, so REIT prices dropped quite drastically in the 2nd half of last year.
What worries me is that some people on the net (analysts, bloggers, etc) are saying that the 10 year SGS yield may rise more to stabilize at about 3.5%. I did some very rough calculations using excel, and I estimate that REIT prices may drop another 15-20% with another 1% price in bond yield (assuming that the risk free spread and DPU stays the same).
So it seems that now is a bad time to invest in REITs, and in fact it may be better to reduce holdings until the 10 year SGS yield stabilizes. So now I must decide what to do with the money if I liquidate some of my REITs.
Since interest rates are rising, I think it is also a bad idea to go into government or corporate bonds.
I think I should go into equities, but I lack experience for value investing right now. I read the posts on this forum with interest, but I think it is a long hard road to get the level of skills required to profit from value investing.
Instead, I am thinking of just buying the STI ETF whenever there is a dip (Like last Sep or this Feb).
I would like to hear your views on the following:
- Do you agree that REITs are likely to drop more? Is it advisable to liquidate part or all now while prices are still relatively high?
- Is it a good idea to invest a lot of money in a index fund like STI? Are there better alternatives for a casual investor?
Thanks!