May, I invest in REITS other than IPO listing?

I appreciate people who are curious to learn new ways on investment. I am a Warikoo fan and he has taught me a lot about investing money in the right places for better returns via his lectures, sessions and youtube videos (you must check them out too). In one of his sessions I came to know about REITs. So I thought I should do a little bit more research on the same. And since IPO is so much in the news these days, there was no chance I wouldn’t have researched about it. 

Anyway, here are a few learnings which I believe will be helpful for you to decide whether to invest in REITs or IPO listing.

Real estate investment trust is a way in which investors can park their funds into real estate projects (mostly commercial) and generate income without actually buying a property for investment. REIT companies manage portfolios of high value real estate and mortgages. One way that they make money is by leasing properties and collecting rent on them. The rent generated is then divided among shareholders in the form of dividends or income.

A few advantages of REIT include:

• Steady income

• Capital appreciation

• SEBI regulated hence transparency

• Helps in generating cash flow

• Liquid investment as they are easy to buy and sell

A few drawbacks however are:

• No tax benefits

• Market risk involved

• High maintenance fees and other charges are included

Companies issue IPO to raise funds from the capital market. As a layman investor you get to buy shares and hold stock in the company. Depending on the shares and income of the company you can earn dividends and bonus shares.

A few advantages of investing in IPO are:

• If you invest in initial IPO offerings then you can enjoy early bird advantage 

• IPO gives you long terms benefits based on the company performance. It is like your retirement investment.

• Transparency is one of the biggest advantages of IPO since everything is out in public as whitepaper

A few drawbacks of IPO:

• Since it is a long term investment it is a time consuming process

• You can experience price fluctuation in your shares based on the performance of the company

• You may find it difficult to sell your shares as there are times when there is a dearth of buyers.

I would suggest you to look closely into both the investment options and get expert financial advice before making a move.

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