First, let me offer up my thanks. It’s been over a week since my introductory article appeared here, and I’ve been hearing the response was very good. I’m so grateful. Thank you.
This week I want to touch on “risk” … when investing in REITs (Real Estate Investment Trusts).
As a long-time, U.S.-based commercial real estate developer, investor, analyst and writer, I encounter risk daily and have learned much about risk during the past three decades of my career. I’m sure that what I’m about to share will greatly help any “Intelligent REIT Investor.” (Coincidentally – the title of my 2016 book, with co-author Stephanie Krewson-Kelly.)
Risk tolerance is crucial in your investing process – being realistic about your ability and readiness to stomach big swings in the value of your investments. Key: Assess the returns you expect, and time horizon you have to invest. Then protect your principal at ALL costs. Best: Research every pick, top to bottom. Focus on fundamentals, then management, then big picture, then valuation.
Investments don’t pay 8% and higher in this environment unless there’s risk. However smart the investor – the more aggressive you are, the more you must double-down on knowledge about the prospective company. Look into financial statements. Question if the dividend can be maintained. Look at management’s track record paying dividends.
As valued readers & subscribers know, I’m a conservative investor, and had my share of losses. I’ve bet big on leverage and higher-yielding investments, but those instant gratification days are over. Let the high rollers play the dangerous tables. I shall sit back with my balanced approach and intermediate-term time horizons of five to 10 years.
Valuations are meaningless without a strategy. Determine the intent of your investments, and choose wisely (even when it’s not your money). No strategy? – Sorry, no valuation. Pick and choose the best categories, the best property sectors, the best REITs of the bunch. (Consider over 150 choices in the Lab section of my Forbes Real Estate Investor newsletter.)