After spending a significant amount of time in the cryptocurrency market, I've decided to shift my focus towards a more stable and passive income strategy. While crypto has been both fascinating and potentially lucrative, my goal now is to transition from a crypto-centric portfolio to one centered on Real Estate Investment Trusts (REITs). Let me explain why I’m making this change and how I plan to go about it.
Currently, I am heavily invested in cryptocurrencies, but I plan to sell most of my holdings by May of next year. If the crypto market rallies and hits my target prices before the end of this year, I will start dollar-cost averaging out of my positions. This approach allows me to manage the risk associated with market volatility while gradually shifting my holdings into more stable assets.
Reinvesting the Profits
Once I have liquidated a significant portion of my crypto assets, I intend to reinvest the profits into other asset classes that offer greater stability and more predictable returns. High-yield savings accounts are one possibility, providing a secure place to store cash with a modest return. However, I am particularly interested in real estate for its potential to provide steady income and long-term growth. The challenge with traditional real estate investments, though, is their illiquidity and the substantial capital required—not to mention the hassles of property management.
Enter REITs: The Ideal Solution
This is where REITs come into the picture. In the Philippines, REITs are a relatively new investment option, offering a way to invest in real estate without the usual drawbacks of illiquidity and property management responsibilities. Essentially, REITs are trust funds that invest in income-generating real estate properties. Their primary purpose is to provide cash flow to investors by distributing a significant portion of their earnings as dividends.
Unlike regular stocks, where earnings primarily come from capital appreciation, REITs are required to distribute 90% of their earnings to shareholders, offering a reliable source of passive income. This feature is particularly appealing to investors seeking steady cash flow. While dividend income from REITs is subject to a 10% withholding tax, the benefits of consistent income far outweigh this minor drawback.
Why Choose REITs Over Direct Real Estate Investment?
Professional Management:
One of the greatest advantages of REITs is professional management. With a relatively small investment, you gain access to a team of experts, including marketers, accountants, maintenance staff, brokers, property managers, and lawyers. This level of expertise ensures that the properties are well-managed, optimizing returns. Managing individual properties would require substantial resources, which is often impractical for individual investors.
Diversification:
Investing in REITs allows you to diversify your investment across multiple properties in different locations, thus reducing risk. If a disaster affects one property, you can still earn income from others. Achieving this level of diversification as an individual investor would require substantial capital, making REITs a more practical option for most people.
**Liquidity:** One of the most appealing aspects of REITs is their liquidity. You can easily sell your REIT shares on the stock market, with transactions completing almost instantly. In contrast, selling a physical property can be a lengthy process involving inquiries, negotiations, brokers, and determining the market price. REITs offer a hassle-free exit strategy, which adds to their appeal.
My REIT Investment Strategy
To begin my REIT investment journey, I've opened accounts with GCash’s AB Capital and Maya’s DragonFi. I am currently waiting for my applications to be reviewed. Once approved, I will evaluate both platforms to determine which one best meets my needs. I have already identified the REITs I plan to accumulate: AREIT, CREIT, and RCR. I am also monitoring SM Prime’s upcoming REIT and will consider adding it to my portfolio once it becomes available.
In the coming months, I'll be tracking the performance of these REITs, sharing my insights, and regularly assessing how well they align with my investment objectives. My aim is to build a portfolio that provides a stable and predictable income stream while minimizing risk.
Conclusion
Transitioning from a cryptocurrency-heavy portfolio to one centered on REITs is a strategic move to build a more stable and diversified investment base. If you’re currently focused on high-risk investments or looking to diversify your portfolio, I encourage you to explore REITs. They offer a liquid and accessible way to invest in real estate while providing the benefits of professional management and steady income.
I hope thus has inspired you to consider other investment options to diversify your portfolio and achieve your financial goals.
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