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Ultimate Strategy of buying REITS: XXX instead of X000?

Posted on by careyourpresent

Buying of Reits

Reits is one the best favourite tools for many Singapore Investors. People like to buy reits for their stable income, even in today’s current high interest rates. What is the XXX or X000 in the title of this blog post? Many must be confused on what I am writing, is it some computer AI thing? Read on to find out more!

Nature of Reits

To many who really understand Reits, should know that REITs are highly geared instruments. Reits are highly leveraged instruments because they use debt to finance their investments/to buy real estate. They issue bonds and use the proceeds to buy properties. The interest payments on these bonds are tax-deductible and reduce the cost of borrowing for the REIT.

This means that any downturn in the economy or increase in interest rates could put pressure on these companies’ balance sheets and make it harder for them to service their debt obligations (aka paying back what they owe). This is what is happening now. In the most recent FOMC meeting, FED raise the interest by another 25 Bps.

If property values fall too much or interest rates rise too high, it could be difficult for a Reit to pay its debts back on time–and this could trigger defaulting on its bonds as well as other bad outcomes like bankruptcy filings! You can see this in some of the not so well managed reits.

Even if you look at the recent popular mapletree family Reits (Mapletree Industrial Trust, Mapletree Logistic Trust, Mapletree Commercial Trust) or even Frasers Centrepoint Trusts etc, all their gearing, interest debts went up. What does this imply?

What this means?

EFR may come for some of the REITs. EFR is equity fund raisings – rights issue, preferential offerings etc. This means investors need to fork out cash from pockets (and return dividend collected) 🙁 These prices of these EFR are usually at a discount to market price and maybe at ratio such as 5 to 100, 2 for 10 etc. For good well managed REITs with strong sponsor that issue that EFR as good price for the investors, in longer term, it will be beneficial to investors. Most of the time, we will apply for excess to take advantages of the lower price.

See more about REITs: Ultimate Free 2 Days Reit MasterClass: Exclusive at Careyourpresent.com only!

Always buy REITs in XXX instead of X000?

Back to the story of XXX, and X000. I am simply referring to the number of shares. During right issues, these prices of these EFR are usually at a discount to market price and maybe at ratio such as 5 to 100, 2 for 10 etc. Hence by buying X000 or XXX number of shares, this will make the entitlement ratio in odd number should there be rights issue. From there, one can apply excess to get more cheaper shares!

Do note that I only this for REITs, for shares like Boustead, SGX (net cash company) etc that I have owned, it is very very unlikely that they would need to issue rights, hence there is no need to specially buy X000 or XXX, just buy 10000, 100000 will do for easier accounting (of course if you want to buy X000 or XXX, it’s fine too).

Recent Buy

Take for example on my recent purchase – MapletreePanAsia Com Tr. I bought just the day before xD to trade and get dividend. Bearing in mind that the drop in DPU with higher gearing would possibility result in right issues later, thus I bought XX100 shares for the reason mentioned above to get odd ratio during EFR.

To my Suprise, for the trading day on 5 May, the price is still $1.74 despite me buying this share at $1.74 on the day before. Basically free Dividend! The same thing happen to my Mapletree Industrial Trust, the price before xD is $2.35 and it is still $2.35 on the day after xD. However, this is bonus to me.

Ultimately, dividend investing is for the long term, as long as you vested in good companies, the fluctuation of the price of its shares doesn’t matter much as long it still give decent sustainable dividends in the long run. Of course, we can trade for additional income (trading around core – point 5 in this article), but this is extra bonus. So always only buy shares that you are willing to keep.

The power of dividend investing!

Some interesting relevant articles about dividend investing that you might be interested. Do read them.

Side Track a bit

Of course, there is no harm to pump in small money for fun! Look at the recent meme coins pump in Crypto! Most of these are pump and dumps and are risky! (The charts below are taken from Coinmarketcap on 6 May 2023 morning).

$PEPE – pump to 1.5 billions Market Cap from few hundred Ks Market Cap in few weeks xxxx% increase! You will never get this in traditional Finance.

$FArb

$TIPJA – up from 300k to 4million market CAP in 2 hours and now get to dumped! But who knows what will happen later?

Disclaimer: But do note to only keep amount of money that you can afford to lose if you choose to speculate into such meme coins. Please note that I use the word “speculate”, not invest! It’s fun but dont put your life savings into it. Of course for those who put life savings into it, and it really get pumped to x100, x1000, it’s really life changing amount! Do your own due diligence!

Personally, my preference for my own risk profile is slow and steady with small fun amount in speculative stuff like Meme coins in Crypto to spice up the excitement in life! Ultimately, I am not young anymore, I want to sleep well 🙂

Good articles that you should read!

People are drawn to dividend investing.

Why? Firstly, dividends provide a regular stream of income, allowing investors to receive a portion of the company’s profits on a periodic basis. This can be particularly attractive for individuals seeking consistent cash flow or looking to supplement their existing income. Additionally, dividend investing is often viewed as a more stable and predictable investment strategy compared to relying solely on capital appreciation.

I always write and share articles, especially on dividends which many people love them. Do read them!

Alternatively, you can go the right side of my page, there is a search bar where you can simply search “dividend” to see all my articles related to dividends!

Of course, you can search for other things that would interest you such as “Careyourpresent”, “Reits”, “Side Hustles”, “Fixed Incomes”, “Savings” etc.

CAREYOURPRESENT

Money just buy you the chance of freedom.

When you are young and working, you exchange time for money. When you are old, you can have lots of money but you can’t buy time back, especially the things that you have missed while busying striking out in career. Of course, if you love your career, and consciously know that you are missing out the first time your child walk or talk, that’s ok, but if you are the other spectrum, please do something about it.

Your kids grew up and they no longer need you to accompany them. They no longer want to sit on your lap to share/do things with you…all these time you spent in your 9 to 6 or even longer cubicles…can the money that you have earned by you back these?

We always thought we have more time with our old parents, but we are wrong. Time with them is ticking away every day. One day it will suddenly be gone. There is no regret medicine, no reset in time. Gone is gone and cannot come back. No matter you are billionaires or millionaires, you cannot reset this.

We always thought that we have more time with our spouse every day, but we are wrong. One day they will be gone too. When you read this, please go tell your spouse that you love him/her and he or she is the best thing that you ever had in your life.

I have picked out some of the more life reflecting articles of the CAREYOURPRESENT series. Do read them:

You can read more about my articles on Careyourpresent via the Category “Careyourpresent” or simply click “Careyourpresent” via the main menu bar.

REMEMBER:

Love your life daily.

You have one less day with your spouse, parents, children and yourself.

Time is ticking away.

For each passing day,

Enjoy and Treasure your Life!

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Category: Investment and Finance

1 thought on “Ultimate Strategy of buying REITS: XXX instead of X000?”

  1. Pingback: REIT Posts of the Week @ 13 May 2023

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