| Perhaps the easiest option to consider is one of | | | | investments over the years, is that your money |
| the 20 or so collective funds that invest in the | | | | is invested in a number of funds. You may even |
| sector. Youreally do need to do your research | | | | have money in a property fund already. |
| and understand exactly what you're investing in. | | | | The next step is to organise your 'asset alloaction'. |
| What you'll find is that some funds invest directly | | | | What this basically entails is making sure your |
| in property whilst others invest in the shares of | | | | investments are split (percentage wise) in line with |
| property companies (with the latter being more | | | | your risk tolerance and the potential return that |
| volatile). | | | | you are trying to achieve. |
| On 1 January 2007 there will be another way to | | | | The main asset classes are Property, Equities |
| invest. Real Estate Investment Trusts will be | | | | (Shares), Cash and Bonds. |
| launched and about 15 property companies (such | | | | So, for example, if you are happy to assume |
| as FTSE 100 company Land Securities) are | | | | more risk with your investments you may have |
| expected to convert to REIT status. REITs will be | | | | an asset allocation that looks something like this: |
| similar to funds that currently invest directly in | | | | Bonds - 17% |
| property, with sizeable portfolios of assets in the | | | | Property - 10% |
| UK and, for some, worldwide. | | | | Equities - 70% |
| But why are REITs being introduced? | | | | Cash - 3% |
| The main reason is that there will be generous | | | | The equities would be spread across large and |
| tax breaks for the property companies. | | | | small capitalised shares, UK, International and |
| REITs will not have to pay income or capital gains | | | | Emerging Markets. |
| tax on the returns produced by their property | | | | The final step would be to choose the appropriate |
| portfolios, so long as they distribute most of their | | | | tax wrappers (ISAs, pensions etc). If you already |
| profits to shareholders via dividends. | | | | have a number of investments it IS possible to |
| Investment Property Databank reports that | | | | alter the underlying investments whilst maintaining |
| property has produced average annual returns of | | | | the tax wrapper. |
| 15% over the past 5 years, although Aberdeen | | | | The Financial Tips Bottom Line |
| Asset Management expects gains to fall back to | | | | Some investors totally ignore (or are not aware |
| 4-5% pa over the next few years. | | | | of) asset allocation. After all, wouldn't it be strange |
| So, should you consider investing in commercial | | | | if you were buying a new car but you weren't |
| property? | | | | allowed to know the size of engine, colour, |
| The simple answer is yes, as long as you | | | | features etc. |
| approach it the right way. | | | | They forget to look 'under the bonnet' and make |
| The first step is to pool together all your current | | | | decisions without all the facts at hand. |
| investments, including pension funds, PEPs, ISAs | | | | When you're next investing (which could be next |
| and anyother equity based holdings. | | | | week if you're investing on a monthly basis) make |
| You then need to analyse where your money is | | | | sure you look at all the facts, set up your asset |
| currently being invested. What you'll probably find, | | | | allocation and increase your chances of a |
| especially if you've purchased a number of | | | | successful 'investment experience'. |