4 ALTERNATIVE INVESTMENT TOOLS TO GENERATE YOUR WEALTH (BESIDES PROPERTY INVESTMENT)
July 7, 2019
It is known that Singaporeans are pretty obsessed with real estate property possessions due to the real estate’s tangible nature. Besides, it’s a large potential for capital appreciation and the ability to provide recurring rental income. The government is fully aware of this which explains why the Singapore government is stepping into the property market by introducing cooling measures. It is to prevent an overheated private residential property market in Singapore by curbing property prices and manage the high demand, making it less attractive to purchase a property (except for Treasure at Tampines) now in Singapore. This would filter out speculators and investors who wished to roll their money through properties. However, there are many avenues for budding or seasoned investors to continue growing their money.
Real Estate Investment Trusts (REITs) REITs is to pool money from investors to acquire properties that fetch high yield. These properties are then leased out to collect rental income. The rental income is then distributed to their investors as distribution.
The biggest advantages of investing in REITs is the liquidity as the property can be a lease or sell in the market. The difference between REITs and property investments is you receive recurring income when you rent your property out or sell your property at a higher price when the valuation improves.
Unlike property investments, it may take months to ensure your property are sold at the fair price, in addition to Seller’s Stamp Duty (SSD) that you would need to bear. As for REITs investments, the biggest advantages is that the liquidity of REITs where it can be bought or sold at the market rates in few days or even hours.
Stocks Similar to REITs but stock is more of a share in the ownership of a company, where investors can enjoy a share of any profits that are generated through dividend payouts or capital gains when the stock prices increase in value.
However, the stocks have higher risks as compared to REITs, bonds and properties due to it’s volatility and not guaranteed of any returns. Basically, the returns are generated when the companies announce dividend payouts, or if the stock performed well and valued more highly by the market.
For beginners, let’s start investing in stocks that you are familiar with such as the blue chop stocks on the Straits Time Index.
Bonds As compared to stocks, the bond is fixed income investment in which an investor loans money to an entity, which borrows the funds for a defined period at a variable or fixed interest rate. Although ‘bond’ is often labeled as boring investments as their prices are generally more stable with lower returns.
Since you are promised a fixed coupon every year, you may lose when the inflation increases. Unlike, property investments where prices of property generally increase along with inflation. For most bonds, their responsiveness reduced to the market which indicates they would not be affected if the market is bad. This also makes bonds a more reliable source of income as compared to property investments.
In any case, bond investments have a finite lifespan, which also ends it maturity date. Returns are also promised at the end of its lifespan and which may be good investment for those seeking to preserve their wealth rather than accumulate.
Exchange Traded Funds (ETFs) Exchange Traded Funds (ETFs) seek to replicate the composition of an index which investors are able to receive average returns of all stocks on their particular index, such as SPDR STI ETF and Nikko AM Singapore STI ETF which both of them seek to replicate the Straits Times Index (STI). ETFs provide a built-in diversification because ETFs automatically turn the diversified investments into numerous underlying assets on behalf of its investors.
ETFs are a more passive form of investment compared to investment properties which may require closer monitoring. Though ETFs do not need active involvement, they are also associated with lower management fee as compared to mutual funds or unit trusts. In addition, investors also are not required to have much knowledge before investing in ETFs, unlike property buyers who have to know how to get properties at a lower price.
Perhaps you may want to consider to invest in ETFs if you prefer to not actively manage and monitor your investments too closely.