As described previously in this post, I have began a savings plan for myself. The plan is very simple. So, here it goes.

Every month, I would carve $1,500 out of my salary. This makes up $4,500 for a quarter and will be invested into REITs according to my own model.

However, the target I set for myself is $5,000 per quarter though. This will mean that I aim to make $500 per quarter from Tumble Mumble trades.

You can follow this plan to invest your money regularly too! Its rather simple and brings great rewards in the long-run.

The idea I propose is to stick to REITs first. Stocks are generally volatile in nature and susceptible to disruptive technologies. Properties are more time-tested, and can withstand stress from bad market conditions.

The main risk of REITs comes from 2 factors. 

1. US Treasury yields; Or US Federal rates. Any spike in either will cause a fall in REIT prices.

2. Poor sponsors. One good example is Lippo Karawaci scandal that led to fall in REIT prices of OUE names, Lippo REIT and First REIT.

To overcome such risks, the idea is to invest regularly, according to a fixed plan. This can also be called dollar cost averaging where you split your investment into batches instead of dumping your money into the market in one go.

Well, this plan works well if you are young, has not purchased any big endowment plans, and enjoy control over your own investment. Not forgetting that you require a high level of discipline too

Thus far, I have made 3 batches of investments into Llama REIT portfolio.

  • Frasers Commercial Trust @ $1.60
  • CapitaR China Trust @ $1.53
  • Capitamall Trust @ $2.46\
  • Dividends collected: $70

Next batch will be made in 2020 Jan to Mar. As it is now heavier in the retail sector, I would probably invest into Industrial or logistics Reits.

According to the LlamaFinance NetWorth calculator, I would achieve these if I stick to this plan and has no changes to my life.

The plan is derived from a yearly 5% investment returns, and a annual dividend growth rate of 2%. Monthly salary contribution is 70% (inclusive of bonus and other income). There is no consideration of pay increments and increase in expenses after Mr Llama's marriage.

Please go ahead and play around with the calculator to come up with your own savings plan too :)

Or do you prefer paying financial planners to do the same for you? 

How do I choose what REITs to buy into?

First, I choose REITs with a reasonable level of Gearing ratio. A good level will be 35% or lower. I would obtain the information from Fifthperson website here.

(Gearing ratio = Borrowed funds as a proportion of Shareholder invested funds)

Average cost of debt should be around 3%. I would want a good sponsor too, best to be government backed ones like Mapletree, Capitaland, or Ascendas.

Lastly, I have plucked data from  and identified a list of REITs with growing dividends in the past 5 years. 

Following, I performed a Dividend discount model and calculate a nominal factor.

Nominal factor = If I were to invest a $1 into the REIT today, how much of it will I get back in dividends in the next 12 years?

Below are my results and list of 'allowed investments' and the nominal factors:

Why 12 years? 
One of my favorite module in school was Business Strategy. The Professor once shared in class that a McDonalds franchise outlet takes 12 years to breakeven. This is one of the fastest compared to other fast food brands.

Silly as it is, but, it is impressive to see First Reit will a nominal factor of 1.011. And, this is with a negative dividend growth rate for the first 3 years. (I purposely assumed they will cut dividends for the next 3 years.)

REITS vs Condo?

For me, it is obviously REITs. Because I am young, and does not have good financial standing. If you have $2m in your bank, I would still say... REITS!

Buying a $1m condo incurs fees, and probably allow you to rent for $2 per month? $24k per year = 2.4% annual yield.

This is too low a yield compared to REITs :)

I estimate that I have to really stick to this plan strictly and reinvest the dividends. I would likely have to work for 20 more years before I can attain some sort of financial independence...

I will be back to talk about the next batch of REIT investment next year. Meanwhile, happy holidays to you :) Hope this sharing helps you in your financial planning too

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