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The Role of Residential Property in Personal Investment Portfolios: The Case of Malaysia

Author/s: Tan Yen Keng, Ting Kien Hwa

Date Published: 1/01/2004

Published in: Volume 10 - 2004 Issue 4 (pages 466 - 486)

Abstract

Residential property has long been recognised as an important component in a household’s overall wealth. The sheer magnitude of purchasing a house has compelled households to commit a disproportionate amount of their funds to own a house, leaving little capital for other kinds of investment. The findings of this Malaysian study show that an allocation between 50% to 65% of the available capital to residential property, particularly in terraced houses, in any of the 5 main regions, and with the balance invested in bonds will produce a superior personal investment portfolio, in terms of enhanced risk-adjusted return and significant reduction in the overall risk. Holding a non-diversified portfolio not only produces sub-optimal returns, but also exposes households to greater risk which can easily be minimised through mixed-asset portfolio diversification.

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Keywords

Housing - Personal Financial Planning - Personal Investment Portfolio - Portfolio Diversification - Residential Property

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