Is Gold a Stable Investment?

A lot of people, especially among the Asian community, have a long conventional perspective where gold is a stable investment compared to other existing investment vehicles. I, for one, used to think so back when I was a teenager.

For a while, I have been intrigued by the conventional thinking of gold as a stable investment. Hence, I went on researching and managed to do some digging into this topic.

In this short yet important article, let’s explore if our conventional perspective is true, and do some myth-busting wherever necessary:

Gold is, in fact, not as stable as you think

To many, gold is thought to be a stable store of wealth. At the very least, gold should be something that, in our very own slang –

“Will not lose money one right?”

Apparently, that’s not the case.

Take SPDR Gold Shares (GLD), an ETF that tracks gold performance, as a benchmark – which has an mean annual return of 0.39% for the past 10 years (not too bad for a ‘stable’ investment, huh?).

However, just looking at the average annual return DOES NOT give us a clear picture of how stable gold has performed.


Now, instead, let’s look at the standard deviation value of gold – a measure that will give us a better view of how volatile is gold over a 10-year period.

With a standard deviation of 16.59, this provides us with a better picture of gold’s volatility.

Essentially, a standard deviation of 16.59 means that if you have held gold for the past 10 years, there is a probability that your return could go as high as 16.98% a year (0.39% + 16.59%), or as low as -16.2% (0.39% – 16.59%) a year.

In comparison, the S&P 500 index scored an mean annual return of 1.13% per year, with a standard deviation of 12.48 for the last 10 years.

This means that, if you have invested and held the US stock market for the past 10 years, your return could be as high as 13.61% (1.13% + 12.48%), or as low as -11.35% (1.13% – 12.48%) a year.

Simply put, gold’s movement to the upside and downside is huge and is definitely not as ‘stable’ as perceived by many. In fact, gold is a volatile asset – even when compared to the stock market.

Gold vs Stock Market Volatility over the past 10 years. (Source: Yahoo Finance)

Gold is Volatile, But…

It is not something you should overlook. This is because gold, even as a volatile asset, is a great portfolio diversifier with almost 0 correlation with the stock market. Also, gold is a great hedge of wealth against growing consensus towards global interest rate reduction.

Even more so, gold also plays an important part in the portfolio of prominent investors, namely as a hedge against inflation. In the All-Weather Portfolio by Ray Dalio (founder of investment firm Bridgewater Associates, one of the world’s largest hedge funds), gold makes up 7.5% of the total portfolio aggregation.

In other words, it still makes a lot of sense for one to include SOME proportion of gold into his or her portfolio as an effective way of wealth preservation. 

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Ray Dalio’s All-Weather Portfolio (Source: IWillTeachYouToBeRich)

No Money Lah’s Verdict

In short, gold is not the ‘stable’ investment as perceived conventionally. As such, gold is NOT SUITABLE to become the MAIN store of wealth and investment vehicle for most people, due to its volatility as mentioned above.

However, gold should not be overlooked, as it still has its advantages in diversifying your risks when it comes to the preservation of your wealth.

To end, here’s an interesting angle to look at gold, as shared by a friend of mine, Jason:

Gold should not be seen through the investment lens, but the preservation lens. And not the preservation of fiat value, but for value where fiat money cannot exist (meaning, the day when our paper money is no longer valuable as a means of exchange)

 

Real Estate Investment Trusts (REITs) is one of my favorites to invest in, as they provide relatively stable dividends – hence making them a great passive income source.


Disclaimer: This article is written based on my best research as of the time of writing, and should not be considered as a buy/sell recommendation. Please do your own due diligence and/or seek professional advice when making your investment decision.

 


Malaysians' Guide to Gold Investment

Gold is an asset that has been universally recognized as a store of wealth since ancient times. Despite not being a legal tender form of exchange (read: currency) these days, gold is still widely accumulated by the society and countries alike.

In this article, let’s look at some interesting (and lesser-known) facts about gold, WHY invest in them, and HOW to invest in gold as a Malaysian.

What Makes Gold So Attractive?

(1) Gold is uniquely beautiful

Gold is stunning on its own. As such, gold’s shinny and elegant nature make it an attractive choice for jewelry and life accessories alike.  

(2) Gold is scarce

Gold is a type of commodity. This means it is a rare metal and the amount of gold available to mankind is limited.

Not only that, the mining process of gold is also painstaking and expensive, making gold an even more valuable asset to own.

(3) Gold is durable and useful

Gold does not decay or rust – and it is almost indestructible. All the gold ever mined is still around in one form or another.

In addition, gold is a good reflector of light and an excellent electric conductor. This contributes to the extensive usage of gold in electronics such as circuits, dental fillings and more.

(4) Gold is homogeneous

One pure gram of gold is similar in value to the next gram. This makes it easy for people to ascertain gold’s value and utilizing it in trade and commerce.

Having understood the characteristics of gold, it is useful for us to understand WHERE gold is being supplied and HOW gold is being used in the world.

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Characteristics that make gold such a special commodity.

Supply & Demand of Gold

Have you ever wonder how is gold being supplied all around the world?

According to the World Gold Council (WGC), around 75% of the world’s gold demand is contributed by gold mining. Unlike paper money which can be printed with relative ease, the only known way to produced gold is to mine them.

That said, gold that is mined is usually not enough to meet the demand for gold. Hence, the remaining 25% of gold demand is met by the recycling of gold. These recycled gold supplies come mainly from jewelry (~90%) and gold extracted from technological hardware.

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Gold supplies all around the world

If that’s the case, WHO is buying gold around the world?

There has been 4 main use of gold worldwide.

The first use of gold, which takes up around 50% of the total demand, comes from (you’ve guessed it)jewelry.

This is followed by investment-related purposes (eg. Gold-backed ETFs), which contribute to around 25% of total gold demand. In addition, gold is also accumulated by central banks all around the world. This takes up around 13% of total gold demand.

Lastly, gold usage for industrial production takes up the rest of the demand.

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Gold demand around the world

Which country holds the most gold?

Now, as mentioned, gold is highly accumulated by the central banks of many countries. Gold is being held as part of a nation’s reserves, mainly due to gold’s nature as a safe haven asset and an effective diversification of their portfolio.

The role of gold to central banks (Source: World Gold Council)

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With that in mind, let’s make a smart guess before you proceed – which are the countries that hold the most gold?

As of October 2019, the United States holds the most gold in its national reserves (8133.5 tonnes!) – which takes up near to 78% of the total reserves. The far second is Germany with a total gold reserve of 3366.8 tonnes, making up 72.9% of the country’s total reserves.

Countries like China and India have a gold reserve of 1942.4 tonnes and 618.2 tonnes respectively, making up less than 8% of these countries’ total reserves.

Back in Malaysia, we are placed at 53rd (out of 100 countries) when it comes to our total gold holdings. This translates to a total gold holding of 38.9 tonnes – which is 1.8% of Malaysia’s total reserves.

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Malaysia is ranked #53 in global gold reserves.

Why invest in gold?

(a) Hedge against the drop in interest rate & geopolitical uncertainties

With global powerhouses like the US reducing its interest rate, it is inevitable that there will be a drop in return (or yield) of major bonds in the market. This will cause the return of bonds less attractive in the eyes of investors.

Adding on to various geopolitical uncertainties, this makes gold especially appealing as a safe-haven asset for institutions and retail investors alike in search of protection against uncertainties.

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(b) Portfolio Diversification 

Gold is also an effective instrument for you to diversify your investment portfolio. This is because, for the past 10 years, gold has almost no correlation (0.04) with the stock market movement.

In short, this means that gold price is generally not affected by the ups and downs in the stock market, making it a good wealth diversification vehicle.

Useful link: S&P 500 vs Gold price movement for the past 10 years

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There are many solid reasons to have gold as part of your portfolio

How can Malaysians Invest in Gold?

#1 Physical Gold

Should you fancy physical gold bars and coins, you can also get them via sites like BuySilverMalaysia. That said, I personally feel that unless one has specific needs for physical gold, I do not recommend them due to safety and storage hassles. 

#2 Gold-backed Exchange Traded Fund (ETF)

TradePlus Shariah Gold Tracker (Code: 0828EA) is Malaysia’s first shariah-compliant commodity ETF that tracks the performance of gold. Essentially, think of it as investing in a fund that goes up and down with the price movement of gold.

With some fees, you can invest in gold without having to take care of physical gold. 

#3 Banks’ Gold Investment Accounts (GIA)

Alternatively, you can also purchase gold through banks’ gold investment account (eg. Maybank, CIMB). That said, GIAs usually charge a spread when you buy and sell gold.

Also, just a personal experience from using Maybank’s GIA: while I could purchase my gold online, I have to visit the counter should I wish to sell my gold holdings, which is a real hassle by today’s standard.

Note: (1) **Refer HERE (2) CIMB GIA has an annual fee of RM5 if year-end gold balance <5g (3) Details about Gold-backed ETF HERE

No Money Lah Verdict

With gold being an effective portfolio diversifier for your wealth, there is no doubt that one should accumulate gold as part of his or her portfolio.

However, the million-dollar question has yet to be answered: Is now a good time to buy gold?

In the next article, I will discuss about the price of gold and if it is a good time to invest in gold - Stay tuned!


Real Estate Investment Trusts (REITs) is one of my favorites to invest in, as they provide relatively stable dividends hence making them a great passive income source.

Click HERE to find out HOW you can pick and invest in quality REITs!


Disclaimer: This article is written based on my best research as of the time of writing, and should not be considered as a buy/sell recommendation. Please do your own due diligence and/or seek professional advice when making your investment decision.

 


If/Then Mindset: How this Hugely Overlooked Mental Skill will Transform Your Investing Performance

Have you ever been in a situation, where you were looking at a stock that you think you should buy, yet did not pull the trigger and ended up regretting your inaction?

How about the times when you think you should get out of an investment, yet too clouded by emotions to do so and ended up taking a huge loss?

When I first started in the market, I faced the similar problem over and over again. Not only it was frustrating, the huge emotional swings involved were also extremely tiring.

As times went by, I have learned an important, yet hugely overlooked mental skill by many that have since helped me improve my investing and trading performance alike.


What is the If/Then Mindset?

If/Then mindset is a simple, yet critical mental skill that is hugely overlooked by new investors and traders in the market.

In essence, the If/Then mindset is a mental simulation of the possible outcomes given a particular set of scenarios, and the actions that you will take should any of these outcomes happen:

“If A happens, I will do X. If B happens, I will do Y.”


Okay, So How Will the If/Then Mindset Improve My Investing Performance?

Let’s look at a simple ranging chart pattern, and how the If/Then mindset could help improve your performance:

What we are looking above is a stock price in a ranging (or zig-zag) pattern. For an inexperienced investor or trader, it is easy to conclude that there is no trend going on with this particular stock and hence no ‘excitement’ in the price.

This chart would be super boring to untrained minds.

However, using the If/Then mindset, one could easily simulate the potential price movements of the stock (scenarios A, B, C). With that, various interesting opportunities could be identified prior to any price movement at all.

Different possibilities can be simulated with If/Then mindset.

As an example, if scenario A happens, then one could buy at the pullback upon a small retracement. However, should scenario B happen, then one could look to buy at the support level. That said, if scenario C plays out, then one could look to sell upon a mini retracement.

Investors can plan ahead and respond to price movement accordingly with If/Then mindset.

Benefits of If/Then mindset

Believe it or not, there are many benefits if you are able to build up your If/Then mental skill:

(1) Early Anticipation of Price Movement

Training your If/Then mental skill will help you to anticipate price movement effectively.

We can never predict with absolute certainty where the price of a stock will move. However, we can use the If/Then mindset to anticipate the different possibilities of price movement, and devise our actions should any of the scenarios play out.

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(2) Reduce Mental Stress & Emotions in Decision-Making

By simulating the possible outcomes prior to price movement, an investor could plan ahead of what could be done should different scenarios play out.

This might look like a simple thing, yet it is extremely helpful in reducing any form of emotional bias (eg. Fear of losing, Ego) and mental stress in comparison to the times when you have to make an immediate investment decision on your feet.

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(3) Improve Consistency in Investing Performance

As you make progress in developing your If/Then mental skill, you can expect consistency in your performance.

Reason being, a strong If/Then mental skill will provide you with a consistent execution process (eg. If A happens, then I will do X) by filtering out a lot of unnecessary biases involved.

We can never predict with 100% certainty what will happen, but we can always anticipate the possible outcomes and respond accordingly.


How to Apply If/Then Mindset in Investing & Trading

By now, it should be obvious that If/Then mindset is a mental skill that is applied prior to making any investment decisions.

As such, most application of the If/Then mindset should be done during the preparation phase of your investing workflow:

If you are a fundamental investor (read: Value Investing), your If/Then mindset could be “I will only invest in a company IF it has a consistent profit growth over a 5-year period”.

If you are a technical trader, your If/Then mindset could be applied in a way IF price movement A happens, THEN I will do X”.

In short, practice and apply the If/Then mindset BEFORE you have to make any investment or trading decision live.

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"If A, then X. If B, then Y. If C, then Z."

No Money Lah’s Verdict:

If/Then mindset is a mental skill that is crucial for an investor or trader’s development to perform better and more consistent in the market.

That said, many tend to undermine the practice of this skill as it seems to be simple. However, ask yourself: How many times have you ever go through the If/Then thought process before making an investment decision?

If any, the If/Then mindset does not require one to be right at predicting the direction of a price. Rather, it trains a person’s mind to anticipate and be open to different possibilities of outcome and respond accordingly.

Personally, I think this is an important skill to develop, and one that I strive to improve on a daily basis.

I certainly hope you do, too.


Read my articles on REIT Investing HERE.

Every now and then, I organize sharing sessions to share insights on how I invest in the market. Book your slot for my upcoming session HERE!

 


Why Are You Still Suck with Investing after Paying Thousands for Courses?

Have you ever attended any of those investing or trading courses out there, and yet not getting the returns you expected?

Even worse, you paid thousands, and sometimes millions for those damn courses!

Hey wait, if this is not hurtful already, those experts even promised you a ‘consistent’ return if you learn their strategies!

If that’s the case, why are you – in spite of the hope and promises (not to mention an initial burn to your pocket) – still not making any money out of what you’ve learned?


Yup, You Are not Alone

I was there.

Sometime before graduating from university, I enrolled in my first ever 3-days investing course (in thousands). Just like many paying for these courses, I thought I will be able to make damn a lot of money (read: immediately) with my initial investment into my investing education.

You bet I was wrong. Super, duper wrong.

Instead of starting to make money from the stock market, I lost money instead. What the hell?


Can you relate?

Then, after losing money with the strategies that we paid thousands to learn, we embark on the journey to look for another course that could promise us a strategy that could provide us consistent and high returns.

Sounds familiar?

The irony is, for most of us, the cycle will continue to roll, and yet we will never find the one holy grail strategy that will make us huge and consistent returns.

Seriously, why is it so? Why do we pay that bloody money and yet not getting the returns we are promised?


‘Experts’ Overpromising Is Real

If you resonate with what I’ve written so far, I bet you will find what I am going share next even more relatable:

Firstly, there will be testimonies of students making X% within 3 months after attending the course. This gives people hope (the most important element in marketing courses).

Then, there will be a pitch to for you eventually quit your job through your returns from the market. This touches the soft spot of most people nowadays.

Wait, there’s more.

How about for everything above, you only need to ‘spend 5 minutes in front of the chart every week/month’? Or ‘get a sure-win stock-pick with a click of a button’ with their trademarked proprietary investing system (or some premium strategy with macam yes bombastic name)?

“Holy sh*t, this looks like something that I could sign up to I fire my boss sometime soon!”

Sounds like something that has slipped through your mind before? Well, it certainly did for me.


Marketers Tell Stories their Customers Want to Listen

Give what you’ll be reading up next a thought:

A weight management company will NEVER market their product as something that’ll produce results slow.

A hair-loss control company will NEVER market their services as something that’ll take a long time to see any effect.

However, we all know that both weight management and hair growth doesn’t happen overnight! In fact, it takes a grueling commitment and dedication to really get the results that you want (depending on your condition too, of course).

In short, a lot of marketing materials are likely not a reflection of the real deal. Rather, those are stories that leverage consumers’ emotions and desires in order to convert them.

It could be a ‘true story’ though. But it is likely not the WHOLE story.

Now, think about how an investment ‘expert’ that is real good in marketing would market his/her expensive courses:

Would you rather sign up for a course that claims that their students make 30% return consistently?

Or would you rather sign up for a course that claims that their students make 30% return consistently, BUT you will need to put a lot of practice and time into the system?

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"Earn quick and guaranteed profit by using our system and strategy!"

‘Experts’ Marketing Stories is NOT the most important reason WHY you still lose money in investing/trading

Humans are naturally born to the desire for instant gratification.

If any, I am willing to bet that 95% of the people sign up for investment/trading courses as a means to learn how to earn money – fast.

And again, I was there as well. The idea of seeing the ‘experts’ flashing their Ferraris, luxury houses and cash is simply too irresistible in a time where most people hate or dislike their jobs.

As a result, people are more inclined to succumb to too-good-to-be-true money games and overpromising marketing ads for investment courses.

The idea of earning money easy and fast from the market touches all our desire for an easy way out.

You may not like what you have been reading so far, but you know there is certain truth to these words.

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Humans, are unfortunately born with the tendency for instant gratification - especially when it comes to quick bucks.

Investing & Trading is a Skill That Needs to be Built Over Time and Practices

Now, think about one of your biggest achievement in life thus far.

It could be your piano grades, your career in consulting or a sports achievement. Did you achieve them by just spending ‘5 minutes’ honing your skills everyday?

Hell no!

The skills that you have today, is a result of the time and effort that you put into building that particular skill. It is the practices that you’ve poured whole-heartedly into your work that led to your mastery in that particular skill.

Becoming good in piano is a skill. Mastering the art of consulting is a skill. Becoming a pro in football is a skill.

If that’s the case, what makes investing and trading any different?

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Investing & trading are both skills that need to be developed over time and effort.

There is no Holy Grail in Investing & Trading

It took me a long time, but it eventually hits on me that there is no shortcut to investing and trading mastery.

They are skills that need time, discipline and practices to develop. They require passion so that you can persevere through the steep learning curves and losing streaks.

More importantly, no one strategies taught by courses out there will bring you results unless you are patient enough to allow for your skills to catch up to what you want to achieve.

If you haven’t got it by now, there is no holy grail to quick wealth in investing or trading.

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Can you become a world-class footballer by practicing 5 minutes everyday? Now relate this back to investing & trading.

The Takeaways

There are many factors that led to us not making any money from the market, even after signing up for expensive investing or trading courses.

If there is one key problem, though, then I would say that it is unfortunate that most of us that signed up for investing or trading courses started off with a wrong mindset.

We wanted to profit from the market quickly, and we thought it was easy. Then, course marketers make it seems like it is really that easy with stories we want to listen to.

But here’s the thing:

Investing and trading are skills that need to be developed over time, practices, consistency, and discipline.

Until we can accept this fact, chances are we will still see people jumping over courses and strategies, in hope to look for the quickest way to well, lose their fortune.


Disclaimer: The article above is not by any means a suggestion to sign up (or to not sign up) for any investment courses out there. It is just a personal opinion on the stated topic and does not reflect any interest in any particular party.


Always Remember: Live Your Own Life, Walk Your Own Pace (No Money Lah’s 1st Anniversary)

Always remember: Live your own life, Walk your own pace. 

The past 1 year or so has been like a roller-coaster ride for me. As a start, No Money Lah’s growth as a passion project has been amazing. I have always like to write and share my learnings and thoughts with people, and No Money Lah allows me to do just that in my new stage of life – adulthood.

As an added bonus, No Money Lah has opened me up to various opportunities and the chance to meet many fantastic people behind the entrepreneurial and personal finance scenes.

Furthermore, my little goal to share what I know about investing also comes true. The tremendous support from the friends and readers to my Breakthrough Your Wealth – REIT Investing workshop have made all 3 workshops, so far, a fully-occupied (and fun) one.

My June 2019 Intake Group Photo :)
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That said, there are times where I just got overwhelmed with fear, doubt, and uncertainties.

The overwhelming fear that people would dislike what I write. The miserable self-doubt where I couldn’t even convey my feelings in words. The struggle against uncertainties towards, well, everything – from my career, my future, time and basically stuffs that could choke one out of breath.


Remember the Times Where You Kinda Messed Up Everything?

Can you relate?

Looking at your peers rising to the ranks in their jobs while you kept on hitting bricks. Or maybe, when you start to receive (more) wedding invitations while you are still getting your own life sorted out. How about those friends who seem like they got everything under control when you are literally losing them?

If you do not feel any of these, good for you. But I feel right about all these emotions playing in my head every now and then.

Have you ever feel like a loser in life? I do.
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At times, they come and go just in a blink. But there are times when it hits, it breaks down even the strongest mental barrier within myself. It is suffocating. Suffocating, knowing that all these efforts could be going nowhere.

But despite all circumstances, these are the times where I felt more alive than ever. Alive, knowing that I hit bricks, yet I am progressing whenever I overcome them. Alive, knowing that I feel these emotions, yet I am not running away from them. Alive, knowing that I am vulnerable, yet I do everything to pursue my beliefs regardless.

Being alive means acknowledging both the good and shitty part of the journey - and still living a kick-ass life.

Here's the thing:

We'll never be perfect in the face of norms. Any attempt to do otherwise is never a smooth journey - filled with uncertainties, fear, and self-doubt.

You are 'lagging behind' if you take a one-year gap year in between college.

You are 'too slow' if you haven't become a senior manager by 25.

You are 'too late' if you haven't get married by 30.

You are 'too old' if you decided to start your own business by 45.

Everyone is different. But norms expect us to walk the same pace in life.


It's Never About People Outrunning You (or Otherwise), It's About Discovering Your Own Pace in Life

I used to run half-marathons (21km) quite frequently (until I have some knee issues). And unless you are the top Kenyan runners, chances are you will be outpaced and outrun by people along the journey.

At first, it sucks whenever someone outpaced you. The feeling is especially real when the person is someone you know, and I experienced that first-hand when my best friends just outpaced me during the journey.

Then, I’ve come to a realization that being emotional when someone outpaced you is not just physically tiring, but even more so, mentally exhausting at the same time.

Slowly, I started to run at my own pace, being totally okay with people getting ahead of me. When I do so, I enjoyed my journey a little bit more. I made some new friends along the way. I challenged myself to outpace not anyone else but myself. Most importantly, I appreciate the fact that for each step I take, I am still moving forward towards the finishing line.

Not all paths are smooth - you just got to believe that you will eventually get to where you want to be. 

The more you run a marathon, the more you'll realize that it is not a race between you and someone else. Rather, it is a race between you and yourself - just like life.

Your Life, Your Path, Your Pace

If that’s not clear enough: Yes, I Do.

Whenever I am not mindful, I will still get overwhelmed with emotions. I will still get anxious about uncertainties. And at times, I could even mess things up.

But it is at these times that, I get to learn to acknowledge my vulnerabilities, strengthen my self-belief and intuition, outgrow myself – all at my very own pace.

And I hope you do, too.


No Money Lah is now 1 Year Old!

If you haven't realized it already, No Money Lah turned 1 last month! 

If you are reading this, I would like to extend my full gratitude to each of you. Your tremendous support has been one of my main motivations to keep writing throughout this year. Regardless of how you got to know No Money Lah, I am hopeful that my articles will keep bringing new insights and values to you, just like how your support kept me going in this amazing year.

Here are my 3 Books Recommendation to Massively Transform Your Life:

Before leaving this article, I thought of sharing with you 3 books that have transformed my life in one way or another throughout this year. If you are looking to a massive breakthrough in life, I cannot recommend these books enough for you:

From left: 

(1) The Miracle Morning by Hal Elrod, (2) Atomic Habits by James Clear, (3) Grit by Angela Duckworth                  


 

 

 


Knowing WHEN to Pat Yourself on The Back is the Key to Personal Breakthrough

As a table tennis enthusiast, I have been coaching on and off since my time at university. Now, as a certified coach by the International Table Tennis Federation (ITTF), my focus is mainly on coaching children during the weekends.

Having interacted with children for more than a year now, I have come to realize that acknowledgment, when done properly, could be one’s key to lasting breakthroughs.


Melvin is one of my youngest students during my weekend session. At 6 years old, Melvin has been with me since early this year.

As a relatively new coach, I have been facing one major challenge when it comes to interacting with kids:

Being pretty new with children, my initial assumption was that the more you acknowledge them, the faster they’ll improve. In turn, I have been using words like “Well done” and “Good job” too frequently during my coaching session.

As a result, I actually ‘Well-Done-d’ and ‘Good Job-ed’ Melvin way too much, even when he was only hitting 3 rallies in a row while he could already do more than 10.

In short, what followed was a series of stagnation in progress and improvement.

Praises & acknowledgment are like sweets - as much as we like them, too much of them are, well, not exactly helpful.

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Frustrated with my initial approach, I started to give fewer to none praises. I thought by being more critical, Melvin would eventually improve.

Well, as it turned out, Melvin did not achieve much progress. Even worse, he started to show less interest during the practice.

Luckily for me, I eventually found a crucial balance between when to acknowledge and provide critical feedback for Melvin.

So, knowing that Melvin could hit at least 10 rallies in a row, I set goals that are a little over Melvin’s comfort zone (eg. 11 rallies).

Then, I proceed to acknowledge him whenever he managed to achieve his goals. On the flip side, at times when he is unable to hit his goals, I will provide more constructive feedbacks rather than overpouring him with unconstructive praises.

When that happened, Melvin (along with the other kids) have been able to show steady breakthroughs and interest during the practice.

Finding the right mindset and balance between constructively critical and acknowledgment are the key to breakthroughs.

Alright, so what does that mean for us all?

You see, very much like the story of me coaching Melvin above, we tend to face similar ironies in our daily life:

As a human, we tend to be over-critical with ourselves when it comes to our goals. It could’ve been the failure to achieve your yearly goal of losing 5kg in weight, or missing an important career mark for the year.

Regardless, we tend to self-talk ourselves into thinking that we are ‘not good enough’ when we make some mistakes or fail in our attempt to achieve our goals – a.k.a. demotivating ourselves.

Being overly critical is killing our morale and motivation - don't you agree?

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On the other hand, on a daily basis, many of us are also prone to making it too easy for ourselves when it comes to the effort of pursuing our goals.

Remember the days when you tried to convince yourself that you have ‘done a good job’ for swimming 3 laps instead of the pre-planned 10? Or the times where you call it a day when you just made 1 presentation rehearsal instead of a decent 3?

In return, so many of us are denied our full potential – not by anyone else, but ourselves.  

In life, you become what you tolerate.

Now, let's face it: In life, we don't always get what we want, but we are most likely going to get what we tolerate. On the flip side, being overly critical to ourselves could also lead to demoralizing self-talks.  

Essentially, everyone's tolerance towards mediocrity and desire towards breakthrough is different. As such, we got to find a balance and the right timing on when to acknowledge our own effort – and pat ourselves on the back.

The problem is, it is easy for us to know when to acknowledge and be constructively critical to someone else. However, it is definitely not the case when it comes to ourselvesYET it is not impossible to do so:


Pat Yourself on the Back to Personal Breakthrough

  • Set realistic goals that are a little over your comfort zone

Firstly, whenever you set to start something – be very realistic with your current capability and dedication.

If you are new to running and you can only practice once a week, you cannot expect yourself to complete your first full-marathon below 4 hours, right?

That said, you could always test your capability by starting with a 5km run, followed by 10km and then 21km before really pursuing a full marathon.

Setting mini targets in line with your final goal is a great way to achieve breakthrough in stages without being overwhelmed.

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  • Strive to do your best – every single day

I consider this a mindset and attitude in living our lives. Imagine the satisfaction if you end your day knowing that you have given it everything you got – at least it feels much better than the opposite.

Regardless of the outcome of our effort throughout the day – we could have the best day ever, or we could screw up here and there, yet no one could deny us from giving our best.

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  • Keep a journal on your progress

Very important. Keep your goals in writing and your action plan towards achieving them.

On a daily basis, write down what you are on to do before starting your day, and check them out throughout the day – it is very satisfying!

Keeping a written journal will ensure your focus with your own progress – and appreciate your own effort along the way.

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  • Once you have done your best, give yourself a pat on the back!

Last but not least, give yourself a well-deserved pat on the back!

Repeat this daily, I am confident that you will achieve some form of breakthrough in terms of progress, skill or mindset real soon.


Hey Wait…

Here’s the thing:

You do not always have to be making huge progress every day. In fact, you should not expect yourself to do so.

At times, there are circumstances where things are simply against our favor regardless of our effort.

That said, doing our best is a mindset. Doing our best is our attitude towards life. Doing our best is a promise that we made to ourselves that, no matter how things turn out to be, we make it a point to not disappoint ourselves by giving everything we got.

Live up with that attitude, and you deserve a huge pat on your back – including the personal breakthrough that follows.


Fundamental vs Technical Analysis (& How To Use BOTH of Them to Invest)

Disclaimer: I do not claim to be an expert in any of the methodologies mentioned in this article. This article is just my general opinion on FA and TA, and should not be treated as Buy/Sell call by any means.


One of the most interesting discussion, when I get to meet stock investors, is definitely one’s application of Fundamental Analysis (FA) or Technical Analysis (TA) in investing – and which is better.

While there is no right or wrong answer to this discussion (of which, sometimes turn into a debate), I thought that maybe I can share my 2 cents on this matter in this article:


First Thing First: What is Fundamental Analysis (FA), and What is Technical Analysis?

FA and TA are essentially 2 different schools of thoughts when it comes to investing. Simply put, they are two different approaches towards achieving the same financial goal in investing – to profit from our investments.

  • Fundamental Analysis (FA)

FA is an approach used by investors to identify the underlying intrinsic value (a.k.a. the real worth) of a company or stock via studies on industry and company’s data & financial statements, economic cycle and seasonality and more.

Ideally, investors that use FA aim to invest in a company while its shares are being sold at a price lower than its intrinsic value. As such, investors will then profit from the dividend returns and when the price of the shares increases down the line - a.k.a. Value Investing.

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Fundamental Analysis (FA) - the use of economic and financial data to study a company inside out.

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  • Technical Analysis (TA)

TA, on the other hand, is another approach towards investing via the analysis of price charts. Through price charts, investors are able to identify important details such as the price trend and the momentum of a company's price.

From that, investors will be able to gauge their ideal entry and exit price.

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Technical Analysis (TA) - the use of price charts to study trends and momentum.

So…Which Approach is Better?

Simply google for this topic and you will get a lot of heated debate between pure FA and TA investors criticizing the approach by the other party – and for good reasons.

  • The Problem with FA

For one, while FA takes into account of various data from financial statements, economic outlook and cycles and, heck, even project future growth with projection models, it CANNOT run away from making underlying assumptions (eg. Assuming X% growth annually, Assuming company X gets this government contract…).

Meaning, assumptions made MAY or MAY NOT come true – hence affecting the outcome of a particular investment decision.

In addition, buying into undervalued stocks with high intrinsic value DO NOT mean that your investment will increase in value the next day (psst..it may take years).

Reason being, the market (reaction between buyers & sellers) is not rational, and may not reflect the underlying intrinsic value of a stock’s price. As such, for certain investing decisions made purely on FA, it will take a lot of patience for things to work out in one’s favor.

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Do you have the patience to wait for your investment decision to reach its potential?
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  • The Problem with TA

On the other hand, the use of TA is widely subjective on 2 underlying elements: time horizon and techniques. Let me explain:

The time horizon of an investor when it comes to TA can affect one’s view on the market for a various degree. As an example, a long-term investor (5 – 10 years) may look into the below chart and have a bullish (a.k.a. positive) view on a particular stock, yet a shorter-term investor may have a bearish (a.k.a. negative) view on the stock.

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Another thing when it comes to TA is that there are so many different methodologies (Price Action, Turtle, Ichimoku, Elliot Wave, etc.) and indicators (MACD, RSI, Bollinger Band, etc.) out there, it is almost impossible for all TA investors to come into agreement for one particular set of price chart.


Why Do I Use Both FA and TA in Making My Investing Decision?

So far, it is not hard to see both the strengths and weaknesses of each approach when it comes to investing:

FA enables us to study a company inside out via financial data and economic/industry outlook, yet lack the precision needed for investors to enter the market.

On the flip side, TA allows us to look into price charts and time our entry into the market with the help of price action and indicators. However, TA methodologies could be different depending on who’s using them, hence making it very subjective.

But hey, WHY NOT leverage on the strength of both FA and TA to improve our overall investment decision?

As in, WHY NOT leverage on FA to help analyze a stock inside out and obtain its underlying intrinsic value (which TA lacks), and apply TA to assist us in our entry into the market (of which FA is weak in)?

Make (a lot of) sense?


Example

A very common way of identifying if a REIT’s intrinsic value is through comparing a REIT’s market place against its Net Asset Value Per Unit (NAVPU). Generally, a REIT that is sold at a market price less than the NAVPU is considered undervalued.

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Note: Market price is RM1.38 as of the time of writing. (Source: i3investor)

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Now, considering that due-diligence has been done and given that YTL REIT has a NAVPU of RM1.606 – meaning, rationally, this is where the market should price YTL REIT in an ideal scenario. Yet, on the price chart below, even at an obvious upward trend, market is still pricing YTL REIT (RM1.38) way below its NAVPU of RM1.606.

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NAVPU (RM1.606) > Market Price (RM1.38) - Undervalued.

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In general, as an investor that purely use FA in his/her investing decision, any price below intrinsic value would be a decent buy. However, one may find it challenging to identify a relatively better entry without the use of TA. (eg. While buying at an all-time high of RM1.38 is still a fundamentally lower price, yet wouldn’t it be better if you are able to enter at, say, RM1.20?)

Now, after using FA to identify undervalued stocks, I’ll normally apply one simple TA method call Moving Averages (MA) cross (refer to picture below). This method would help me identify trend changes on price charts:

Simply put, when the 50-Days MA (Green line) crosses above 150-Days MA (Yellow line) and both MAs are sloping upward, it would signify an uptrend movement and would be an ideal entry point for me.

Therefore, even when YTL REIT is valued below its intrinsic value (RM1.606), with a simple TA method, I can identify a relatively better entry. This is a better gauge for entry for sure, if you were to ask me.

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The use of Technical Analysis (TA) provide investors guidance on a relatively better entry and exit.

No Money Lah’s Verdict

So here you go! This week’s article goes a little more in-depth about investing methodologies and approaches, and I genuinely hope that you learn or gain something out of this!

With that in mind, if you find this article useful, do consider SHARING this article out, and be sure to subscribe for more value-adding content from No Money Lah!


 


5 MUST-KNOW Terminologies Before You Invest in REITs

Real Estate Investment Trusts (REITs) are essentially companies that operate and/or manage real estates. REITs are especially well-received among long-term investors that are looking for a reliable passive income stream.

To invest in REITs is identical to typical stock investment – you buy their shares through your stock broker.

That said, here are 5 terminologies that you HAVE TO know before investing in REITs:

(1) Distribution/Distribution Per Unit (DPU)

Distribution is one of the MOST IMPORTANT elements in REIT investing. Essentially, distribution refers to the total amount of money that a REIT is paying back to its investors at the end of every quarter or Financial Year (FY).

As such, take the total distribution of a REIT and divide by the total number of shares of a REIT, and you will get the Distribution Per Unit – a.k.a. the total amount of distribution you will get as one unitholder of a share in the particular REIT.

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DPU details of SunREIT (Source: i3investor)

(2) Dividend Yield

Compared to Distribution/Distribution Per Unit, Dividend Yield is much more familiar to people.

In short, Dividend Yield is derived from Distribution Per Unit (DPU) – by dividing DPU with the price per unit of a REIT.

From the example above, the Dividend Yield of SunREIT for its latest four quarters is:

Dividend Yield of SunREIT

(3) Net Asset Value (NAV)/Net Asset Value Per Unit (NAVPU)

Net Asset Value shows the total worth of the net assets of a REIT.

When divided by the total shares (or units issued) of a REIT, you will get the value of Net Asset Value Per Unit (NAVPU), a.k.a. the total value of the net asset of a REIT per share.

NAVPU is very useful to determine if a REIT is undervalued or overvalued. As an example, if the price of a REIT is less than NAVPU, it shows that a REIT is currently market-priced at a value less than the worth of the net asset of the REIT (undervalued).

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YTL REIT market price: RM1.34 vs NAVPU (or NAPS) of RM1.6059. (Source: i3investor)

(4) Gearing

Gearing refers to the leverage of a REIT. Essentially, it refers to how much is the total debt of a REIT in relative to its total asset.

Generally, a REIT is legally required to maintain a Gearing of 50% or less.

Source: YTL REIT 4Q FY2019 Quarterly Report

(5) Occupancy Rate

Occupancy rate is extremely crucial to determine if a REIT is going to earn money. Simply put, the more tenants that occupy a REIT's property, the higher the occupancy rate of the property.

Generally, we should want to look for REITs that have a high occupancy rate for their real estate portfolio:

Mid Valley and The Gardens have more than 95% occupancy rate. (Source: IGB REIT FY2018 Annual Report)

No Money Lah’s Verdict:

So that’s it! Here are 5 terminologies that you MUST KNOW while investing in REITs. While this is a short and simple article, yet if you are new to REITs, I definitely hope that you find this article informative!

If you find this article useful, do share this article out to benefit more people around you! Also, do check out my articles on WHY you should invest in REITs, and the different TYPES of REITs in the market (and why they matter!)



6 Types of REITs and WHY THEY MATTER

Real Estate Investment Trusts (REITs), are essentially companies that own and/or operates income-generating real estates. As an example, Mid Valley and The Gardens are operated by IGB REIT, and from the profit earned (mainly through rental), REITs pay their investors in the form of dividends.

That said, in this article, I want to dive deeper into the types of REITs in the market, and why knowing this is important in your REIT investing decision.

Essentially, there are 6 kinds of REITs that you will find in the listed market (a.k.a. REITs that are purchasable in the Malaysian stock market):

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(1) Retail REIT (eg. KIP REIT, IGB REIT – Mid Valley, The Gardens)

Retail REITs, as the name suggest, are REITs that own and operates malls and shop lots.

In other words, Retail REITs’ revenue comes from renting the space of their properties to retail tenants (eg. Nike, G2000, llao llao and more).

Pros:

If a Retail REIT owns a mall that is located at a prime area, they’ll generally attract crowd which would translate to 3 things: (a) Low tenant turnover, (b) Ability to command higher rental, and (c) Relatively stable revenue stream.

Cons:

That said, the economic condition would generally impact the revenue growth of Retail REITs. Logically speaking, consumption will drop in a bad economic condition and it will impact Retail REITs’ revenue negatively.

IGB REIT owns and runs Mid Valley and The Gardens.

(2) Office REIT (eg. MQ REIT, UOA REIT)

Office REITs are REITs that mainly own and operates office buildings.

Some of the common tenants of Office REITs are mainly from the financial services sector and MNCs.

Pros:

Office REITs that have office buildings in prime areas are able to command higher rental, BUT…

Cons:

Excess supply of office buildings are leading to (a) Less sticky tenants and (b) Price wars among office spaces.

Also, Office REITs will also be impacted negatively by bad economic condition.

UOA REIT owns and runs office buildings.

(3) Hospitality REIT (eg. YTL REIT)

Hospitality REITs are NOT REITs that own and operate hospitals.

Instead, Hospitality REITs are REITs that manage hotels and residential buildings. As an example, YTL REIT owns the JW Marriott hotel (in Malaysia and Australia) and the iconic Majestic Hotel in KL.

Pros:

Hospitality REITs can benefit from the rise of the tourism sector of the country, as well as currency drop that would lead to our country being a more attractive tourist-friendly country.

Cons:

Highly impacted by global economic growth. A dull economic scenario would impact the tourism sector badly and in turn, lead to less revenue for the hospitality industry.

Majestic Hotel is owned by YTL REIT

(4) Industrial REIT (eg. Atrium REIT)

Industrial REITs are REITs that own and operate properties like warehouses and factory spaces.

Pros:

Industrial REITs have little need to spend property maintenance or fancy designs relative to other REITs, which translates to lower operating expenses.

Cons:

(a) Most heavily affected by economic downturns, as factory operations and inventory storage, would be cut to a minimum during a downturn. (b) Limited rental hike potential due to a similar business model.

Atrium REIT

(5) Healthcare REIT (eg. Al-Aqar REIT – KPJ Hospitals and Specialist Centres)

Healthcare REITs are REITs that own and operate hospitals and healthcare services properties.

Pros:

No matter the economic condition, Healthcare REITs would, generally, be an excellent defensive hedge as people will need healthcare services no matter the economic condition.

Cons:

Limited expansion opportunity within its own properties (eg. Long term lease agreement that reduces revenue upside), unless opting for acquisitions of new or existing healthcare properties.

Al-Aqar REIT is the only listed Healthcare REIT in Malaysia

(6) Mixed REIT (eg. SunREIT – Sunway Pyramid, Sunway Tower & Axis REIT)

Mixed REITs are generally, REITs that own and operates real estates of different nature.

As an example, SunREIT has a portfolio of properties ranging from retail malls, offices, hotels, healthcare, and warehouses.

Pros:

Highly diversified range of properties. More resilient to various market fluctuation and economic conditions.

Cons:

Exposed to all kind of risks brought by owning a different kind of REITs.

SunREIT has an impressive portfolio of diversified properties.

Which type of REITs should You Invest In?

Based on the type of REITs introduced above, which are the REITs that you should consider investing in?

Generally, while REITs are relatively stable compared to conventional stock investing, REITs do have different risk profiles depending on their nature:

As an example, if you were to invest in Healthcare REITs for their nature of being more stable during various economic conditions, you should (generally) expect a lower yield compared to other REITs as Healthcare REITs have a lower potential for revenue growth.

On the other hand, if you were to invest in Industrial REITs, you should (theoretically) expect a higher yield as a compensation for the relative risks involved while investing in Industrial REITs.

Risk vs Expected Yield among Different REITs

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That said, the actual yield of your REIT investments may or may not reflect the ideal scenario given existing market volatility and actual business performance of REITs – but since we are discussing purely on the nature of the respective REITs themselves, I think a necessary conceptual understanding is still value-adding to you.


No Money Lah’s Verdict

So that’s it – the 6 types of REITs that you will find in the market. I hope this article has been informative for you, and if you are new to REITs, give you a more in-depth understanding of REITs.

In short, not all REITs are made the same and different REITs should be studied at with a slightly different lens depending on their nature.

REIT, in my opinion, is definitely a great choice that you can seriously consider should you are looking for a solid passive income and long-term investment to fulfill your financial goals in life

In the coming articles, I will share with you the terminologies that you should know in REIT Investing and an overview of all listed REITs in Malaysia.

Stay tuned!



Introduction: REITs and Why Invest in Them?

As a kid, two of my most visited shopping malls are Mid Valley and Sunway Pyramid. While both are without doubt huge malls, an experience stood out the most while I visited these malls every time as a kid: it was pretty damn hard to look for a parking space!

Wouldn’t it be amazing if you can own part of these crowd-magnet malls, or get a share out of their profit?

Well, in a way, you can!

Today, I would like to talk about Real Estate Investment Trust (REIT), a personal favorite subject of mine.

Can you guess how much is the monthly rental of a little kiosk like this in Mid Valley? (Source: Mid Valley)

(1) What are REITs?

Real Estate Investment Trusts (REITs) are companies that own and/or operate real estate. Publicly listed REITs are traded just like any stocks listed in the stock market, making it very easy to invest in REITs.

Some of the more well-known real estates that are part of Malaysia REITs portfolio include Sunway Pyramid (SunREIT), Mid Valley (IGB REIT), The Gardens (IGB REIT), KPJ Hospitals and Specialist Centers (Al-Aqar REIT), Pavilion (PavREIT), JW Marriott hotel (YTL REIT) and more.

In short, REITs are great investment instrument for those who wish to own or profit from popular and profitable real estates – where others spend and consume on these places, you profit from them.

Source: Sunway City

(2) How do REITs make money?

To recap, REITs are companies that own and/or operate real estate. When it comes to real estate, it is not hard to understand the underlying business model of REITs – a.k.a. How do REITs make money?

Mainly, REITs make money through rental income from the real estates that they own and/or operate.

As an example, IGB REIT’s income is derived from the rental collected from its tenants for both Mid Valley and The Gardens Mall.


(3) Why Invest in REITs? – the Pros of REIT Investment

REITs are especially well-received among people longing for long-term investment for some of the reasons below:

a. High proportion of Income Distribution

In order to be qualified as a REIT, companies are required to pay out at least 90% of its net income as dividend to their investors.

Which lead me to my second point…

b. Attractive Dividend Yield – making it a great passive income stream

Due to the dividend payout nature of REITs, dividend yield from REITs is generally better than typical stocks dividend in the market.

In general, Malaysian REITs yield a decent 5% – 7% dividend on a yearly basis. Aside from that, should investors time their entry point properly, they are also able to enjoy growth from capital appreciation as well. (eg. Buy at RM1.00/unit. A price rise to RM1.20 will make up to 20% capital growth for investors)

Yield Performance of REITs vs other instruments.
Sources: Respective instruments' official page, CEIC Data

c. Relatively less risky than typical stock investments

REIT investment is also relatively less risky compared to typical stock investments due to most REIT’s business model that lock in tenants for at least 1 – 3 years, ensuring a relatively stable income stream for REITs.

REITs volatility in comparison to the market. (Source: Investing.com)

(4) Cons & Risks of Investing in REITs

a. Less capital growth opportunity

Due to its nature of being more stable in relative to typical stock investments, REITs growth in revenue and profit is often predictable, making it less exciting for short-term speculators and traders to speculate the REIT sector.

In other words, REITs growth are more likely supported by its fundamental business growth – making REITs an answer for those who seek long-term investment opportunities, but not so much for short-term speculators and traders.

b. Exposure to Market Fluctuation

Unlike conventional real estate investment, publicly listed REITs are also constantly exposed to a certain degree of market fluctuation due to its nature of being listed in the stock market.

Meaning, regardless of the fundamental stability of a REIT business, REITs are still prone to a certain degree of price fluctuation in the market.

c. Change in Portfolios’ Fundamental

Similar to conventional real estate investment, REITs also have the risk of having a strong income-producing real estate turning otherwise due to changes in market demand or fundamentals.

As an example, Sungei Wang Plaza (CMMT) and Subang Parade (Hektar REIT) used to be the to-go malls in the 90s, yet the rise of more attractive malls eventually replaced their glory.

Subang Parade - once known as the longest shopping mall in Southeast Asia. (Source: Subang Parade Official Facebook Page)

(5) How to Invest in REITs?

There are both private (Alpha REIT) and public-listed REITs (eg. SunREIT, IGB REIT, Axis REIT, YTL REIT) in Malaysia.

Generally, the easiest and most common way for one to invest in REITs is through the stock market, as there is where one can find publicly-listed REITs to invest in.


No Money Lah’s Verdict

Personally, I find REIT investment relatively simple to understand and work around, due to its business model that is (most of the time) straightforward.

In a way, REITs allow retail investors to invest in a portfolio of income-generating real estates, while enjoying the convenience of participation of the stock market. (eg. Buy and sell as instantly as you please, unlike conventional real estate/property transactions)

With that in mind, I believe that there is no harm to have REITs in your investment portfolio.

In the coming posts, I will dive into the different type of REITs and an overview of REITs in Malaysia, so stay tuned!

Do you invest in REITs? If you do, what REITs have you been investing lately? Would love to hear from you!


p.s. REITs are my personal favorite when it comes to long-term investment due to its decent dividend and simple-to-understand business model.