Asked on 18 Jan 2020
Is there any risk at all? Should i be looking to diversify? If yes, what should I be looking at?
Your portfolio is narrowly-focused on REITs. Therefore some of the bigger risk is that, your portfolio may encounter huge drawdown when the overall REITs sector is underperforming or in the down-trend.
You should try to diversify your portfolio into other sectors, markets, asset classes. If interest rates go up, your entire portfolio will be impacted.
Concentration risk (on properties)
Diversify into other sectors and asset class
Buying Etf and index is a quick way to diversify
If your portfolio is made of 99% REITs, there is a risk that all the REITs will undergo a correction at the same time during a market downturn. To put it simply, your portfolio is not well diversified enough. I would recommend a diversified portfolio with different asset classes with low correlations.
The risk is that yr portfolio basically only expose to property. If there is any bad news on property (new ruling from gov, interest rate, etc...), the volatility will b very high.
Interest rate is the key risk you're facing given how prices move inversely with interest rates due to a lower net income for payout when interest rates rise.
Some other notable factors would be if your REIY portfolio is over-concentrated on a particular industry, you may face cannibalisation where the smaller REIT companies might one day fall i.e. Sabana REIT due to the over-competitiveness.
Dilution of shares is another as REITs would conduct rights issue on a more frequent basis as compared to usual companies.
Concentration risks of course. Right now, REITs are priced high because interest rates are low. However, if it goes the other way, there is a possibility REITs will correct downwards.
Think of it as you just putting all your money in 1 stock, pretty close analogy.
Concentration risk. Within itself, there are various risk factors, e.g. interest rate risk, policy risk, market risk
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