Investing in REITS

Dear Mr. Tan,
Thank you for maintaining your blog. I have learned a lot from your experience, observation and answers to other people's questions..

May I know your views on Real Estate Investment Trusts (REIT) for long term investment as compare to STI ETF?

There are 20 REITs listed on SGX
http://stquote.sgx.com/live/st/STREIT.asp.
At the current price, their average return is about 6.8% p.a
http://www.reitdata.blogspot.com/

REIT would meet some of your criterias for long-term investment:
a) A diversified fund
b) Blue chip investments, i.e. non-speculative
c) Low cost, i..e. less than 1% per annum
d) Low upfront fee, less than 1%

REPLY
REITS are invested in properties. This is an asset class separate from equities.

Properties are also suitable for long term investments. You can have some of your long term savings in REITS. A suitable proportion is 25% in REITS and 75% in equities and bonds.

You are right that REITS offer an attractive yield. Part of the yield represents a return of your invested capital, as the properties are a depreciating assets.

After allowing for this factor, the yield is still attractive. I have invested part of my savings in REITS. If you search my blog and look for REITS, you will get a few postings.