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阿花。 wrote a post · Sep 18, 2024 22:58

With the impending interest rate cut by the Federal Reserve, is a real estate investment trust (REIT) fund a better choice?

Hello, moomooers. On September 19th, the Federal Reserve will announce an interest rate cut policy, which is undoubtedly a significant boost for REITs that rely heavily on credit operations.
With the impending interest rate cut by the Federal Reserve, is a real estate investment trust (REIT) fund a better choice?
Many friends are not familiar with REITs. Let's make a simple analogy. REITs are like a big landlord who borrows from banks to purchase properties (such as shopping malls, office buildings, factories, etc.) and then leases them to earn rental income. Therefore, REITs are very sensitive to bank interest rates, which are closely related to the company's profit margin.
Since the Federal Reserve began raising interest rates continuously in March 2022, reaching a peak of about 5.5%, it has not only attracted global capital, but also significantly increased the operational difficulties for REITs. In addition, during the global pandemic, countless small, medium, and large enterprises have suspended operations, reduced business scale, laid off employees, and implemented work-from-home policies. As a result, business owners have had to reduce their demand for office spaces, factories, warehouses, and other properties. The demand for property leasing has continuously declined, dealing a fatal blow to REITs. I believe everyone can intuitively understand this by examining the candlestick charts of major REITs over the past three years.
Against this backdrop, the Federal Reserve has been signaling interest rate cuts this year, seemingly reviving the spring for REITs. $REITs (LIST3047.SG)$
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The expectation of interest rate cuts has directly led to a reduction in operating costs and an increase in profit growth expectations for major REITs. In addition, the e-commerce and technology giant Amazon announced on Monday of this week that it is canceling the work-from-home policy for its global employees since the pandemic began, indicating a gradual recovery and increase in demand for office spaces. This is also a recent reason for the continuous rise of REITs.
After the above brief introduction, I believe that all friends can have a basic understanding of reits, and I would be honored to provide some new investment insights. In the days to come, I will further reduce my allocation to US stocks (mainly technology stocks), and start to add positions in reits at dips. Since I am also an investment novice, I will not make specific investment recommendations on the selection of reits. Personally, I will consider the size, liquidity, recent profit margin, and dividend yield (dividends of reits are very important and should not be overlooked, this is one of the greatest pleasures of investing in reits - making you a landlord) as my selection criteria.
Finally, the above remarks are my personal views and do not constitute any investment advice. Investment carries risks, so market entry should be cautious. Thank you for the invitation on topics. @Invest With Cici on the topics' invitation.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only. Read more
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阿花。
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