236) REITs vs REITs Unit Trust Fund
What is the difference between REITs and REITs Unit Trust Fund?
REITs = Real Estate Investment Trusts
REITs Unit Trust Fund = Real Estate Investment Trusts Unit Trust Fund
Real Estate consists of buildings, land, offices, hospitals, shopping malls, hotels, factories, warehouse and other similar physical properties.
To make the differences clear, we use Stocks and Equity Fund as an example.
Stocks consists of the ownership of one company.
Equity Fund consists of many stocks.
Similarly,
REITs consists of one Real Estate Management Company.
REITs Unit Trust Fund consists of many REITs and other assset types (stocks, bond, money market)
REITs Unit Trust Fund normally buy REITs of many types and from different countries. The REITs fund diversify its investment to reduce risks and to take advantage of different growth potential in different areas.
What are the Differences between REITs and REITs Unit Trust Fund?
Here's a list for your reference:
1) Easy to buy & sell Unit Trust in small amount. Determined in Dollar value, and not units quantity.
2) Lower Unit Trust initial starting amount compared to higher value of REITs
3) Initial Service fee is based on percentage of Dollar value invested. Not on minimum fees charged per transaction.
4) Pay only initial service charge when buying Unit Trusts. Normally no fees when selling units. REITs charge fees when buy and sell.
5) REITs Unit Trust fund is managed by professional fund managers. No need to study the details of REITs company financials. Also not easy and costly to get access to company’s information.
6) Avoid issue of buying REITs based on hot tips & recommendations from others. Most investors buy REITs without understanding the company’s business.
7) Not much study required to invest in REITs Unit Trusts. A lot of work and time to study the many and different REITs before buying.
8) Need time to monitor REITs price movements, while no need to monitor unit trusts prices regularly.
9) Not easy to buy foreign REITs. Have to open different market trading accounts.
10) REITs Unit Trusts are a diversified investment, while each REIT is specific to one company only. Buying only a REIT has a specific risks of that company.
11) Easy to switch Unit Trust between local and foreign investments.
12) Easy to switch Unit Trust between equity, bonds and money market.
13) UTMCs are paid by percentage of NAV. So the motivation to keep increasing the Net Asset Value. REITs brokers are paid by trading transaction commissions. Motivation to buy and sell more often.
14) REITs price volatility is much higher than Unit Trusts. Potentially Higher Return, but with Higher Risks.
15) Unit Trusts distributions can set to be auto-reinvested. REITs dividends are normally paid out as cash; not able to maximize the compounding returns.
16) You can buy and sell Unit Trusts any time. Buying and selling of REITs depend on the demand and supply. You can't buy a REITs if nobody wants to sell the REITs. You can't sell your REITs if nobody wants to buy the REITs. Many REITs are untraded.
17) You risk the effect of emotionally involved in your REITs. Your mood will be affected by the daily performance. You feel happy when the price go up. Feel sad and angry when the price dropped.
18) Unit trust fund managers consists of teams of experts. For REITs, you managed on your own. You have limited resources and expertise.
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