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

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 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 risks. Holding a non-diversified portfolio not only produces sub-optimal return, but also exposes households to greater risk which can easily be minimised through mixedasset portfolio diversification.