Asked on 02 Jul 2020
Investing can be really overwhelming at the start, as there are so many terms to learn and so many different vehicles to consider!
Though your friends may mean well, I strongly advise you to understand the investment product first before going into anything based on a tip that your friends provide.
This is because in the event that something goes wrong, you can tell yourself that you were aware of the risk of investment right from the start, and are able to live with that potential loss.
Investments always come with risk. With higher rewards, comes higher risks. So you need to determine your risk profile and then choose an investment product that is suitable for you.
With regards to learning more about investing and personal finance, there are tons of resources that are out there, which come in different mediums as well.
I have a list of resources that I've compiled on my blog, I hope that you would find it useful and that you are able to start your personal finance journey as well!
02 Jul 2020
I would suggest looking through the personal finance sites like Seedly and Dollars and Sense to learn more about the various modes of investment (not just REITs) and how they work. There's too much to cover in a QnA post.
You could look into the direction of index funds and roboadvisors for passive investments. REITs are good for those looking for an additional source of cash flow.
02 Jul 2020
Did you ask your friend why start with REIT? Does your friend even know what REIT is? REIT is essentially investing into Real Estates managed by REIT managers and there are different types of REIT with differing characteristics. (can be a defensive stock or an aggressive stock)
REIT's primary purpose in a portfolio is for Income. It produces passive income for the investor on a quarterly or semi-annual basis. If your capital is minute (1k-5k), it will not be wise to fully invest into REITs since the dividend gains will be insignificant. Instead, you can look into Growth-based Stocks/ETFs for capital appreciation. (US stocks usually) Of course you can combine both Income +Growth. (As we are in our 20s, its more wise to tilt towards Growth during accumulation phase of our investments.)
To break it down, SG market is mostly for dividend play while US market is mostly for capital appreciation. Knowing the characteristics of different markets can help you understand how and why some stocks have differing growth rates/dividend yields.
For a start, I recommend you to get started with a roboadvisor (eg syfe, stashaway) if your capital is small. While you slowly DCA and invest in the robos, you can slowly build up your knowledge while staying invested. Starting with robo also ensure that you do not make rookie mistakes such as buying too little shares of stocks and incur high comission fee percentage or banking all your capital on one "Good" stock (eg DBS haha) or panic selling.
If you have any questions, do let me know and I'll be glad to answer more! Cheers
The overview of my strategy to investing for Beginners will be as such.
Look at your own finances first.
Do you have at least 6 months worth of expenses as emergency funds?
Take note of the predictable expenses in the coming months and years, any big ticket purchases?
Craft out your own allocation for your inflow of cash. Seedly recommends 50% expenses, 30% savings and 20% investments.
How is your insurance coverage? Are there sufficient health insurance coverage? Refer to seedly article on the essential insurance plans and ILP isnt one of them. Speak to your parents on what plans they bought for you, evaluate whether to continue paying the premiums.
For starters, I really advocate passive investing through ETF using ETF RSP or Robo-Advisor. I think this should be the gateway to investing for beginners before they venture out into picking stocks and so on.
As for REITs, depending on the type of investor you are, it is fine to invest in this for starter. Just have to take note that you buy REITs for the dividend yield and risk of pumping in more money due to equity raising by the REITs.
While investing in Robo-Advisor or ETF RSP, you can read more to gain more knowledge. Investment books, blog articles on how one analyses a company for the second part of investing.
Everyone starts from square one. No one is smart when they first started out.
Hi fellow Hariz.
I would recommend you start with understanding the various asset classes and portfolio asset allocation.
Don't buy individual building blocks (REIT, Stock, Bonds, Gold) without having a blueprint on how to invest this money and not only right now, but for the next 4 decades till you're retired.
I would still recommend you to work with a financial advisor to guide you or build this with you while you pick up understanding along the way.