Singapore REITs have been on a rollercoaster these past weeks. Ever since Phase 2 (Heightened Alert) [P2HA] measures were announced, retail and office REITs have taken a tumble and REITs in general seem to be out of favour with investors.
It’s easy to see why. S-REITs have been on a precipitous slide since the beginning of May as concerns about rising inflation and further COVID restrictions sent investors heading for the exits. But as Warren Buffett famously said, “Be fearful when others are greedy and greedy when others are fearful.”
We took this opportunity to add more funds to our Syfe REIT+ portfolio, which remains one of our favourite investments to date.
What is Syfe REIT+?
REIT+ is a portfolio of the 20 largest REITs in Singapore. It tracks the iEdge S-REIT Leaders Index and includes well-known REITs such as Ascendas REIT, CapitaLand Integrated Commercial Trust, Mapletree Commercial Trust and more. Even if you’re not familiar with these REITs, you probably know the properties they manage, from Changi Business Park to Bugis Junction to VivoCity.
In 2020, the portfolio reported a dividend yield of 4.5%. Although this was lower than its 2019 dividend yield of 5.1%, it’s still a robust performance considering the impact of COVID-19 on Singapore REITs last year.
What we like about the portfolio is the diversified exposure it provides. There’s no need to pick REITs or try to guess which REIT sector is going to perform well. Case in point: Retail REITs were this year’s top performers until P2HA measures were announced. Anything can happen in the stock market, which is why diversification can be so powerful.
REIT+ holds REITs across the retail, office, industrial, data center, healthcare and hospitality sectors. So even if retail and office REITs hit a rough patch, you still have exposure to other sectors to cushion the blow.
Our experience with Syfe REIT+
We started investing in REIT+ in April last year and absolutely caught the rally that followed. Here’s a snapshot of our performance.
And here are our top REIT holdings. While our REIT+ portfolio has been affected by P2HA measures, the relatively high exposure to industrial REITs like MINT and AREIT helped cushion the portfolio somewhat.
Our only regret is not investing more in the portfolio last year. Although we’ve been looking to increase our investments, we decided to hold off as we felt that many S-REITs were looking fairly valued, especially after rallying so spectacularly from their March 2020 lows.
For some context on how S-REITs have performed, here’s a snapshot of the iEdge S-REIT Leaders Index, which is essentially a barometer for the broader S-REITs market.
If we had a crystal ball, we would definitely have invested more in November 2020 and March 2021. But of course, hindsight is always 20/20. We had been focusing more on US and tech stocks late last year so we missed out on the November crash. The March dip would have been another good opportunity, but we hesitated and the market rebounded.
So when the recent correction happened, we were ready and invested another $1,000 in mid-May. Since then, there have been some further volatility but with the REITs market slowly recovering, we feel we made the right call.
It’s almost impossible to time the market precisely, so we’re comfortable just investing around a market dip. We know of friends who will feel really pek chek if they don’t buy or sell at the absolute trough or peak, but honestly, nobody can predict what’s going to happen in stock markets. Don’t beat yourself up thinking that you should have invested earlier or later by a few days – what’s more important is that you made your investment and can now bank on the upside.
Why we’ll continue buying REITs in 2021
When P2HA happened, many people told us that retail and office REITs were done for. But we felt strongly otherwise and saw the dip as an opportunity to buy more REITs at a discount. As mentioned, we missed the boat in November 2020 and March 2021, so third time’s the charm for us.
For one, we were confident that restrictions will be eased on 13 June if Singapore gets the outbreak under control. In PM Lee’s address today, that’s exactly what he said. Secondly, while central malls may suffer during this period, suburban malls will likely still enjoy strong footfall from people dabao-ing food or just stretching their legs after being cooped up at home.
Finally, permanent WFH will be a pipedream for many Singaporeans once the COVID situation is stablilised. A lot of employers – especially the more traditional ones – still value employee face time and seeing their staff at their desks.
Ultimately, we weren’t too worried about the short-term impact P2HA measures may have on REITs. Going forward, there will inevitably be new pullbacks in the REITs market, whether from concerns around interest rates or worse, an unexpected spike in COVID cases yet again. These don’t faze us. In fact, we’d welcome more corrections so that we can add more to our REIT holdings.
Will you bet against Singapore’s real estate?
Our bullishness on the REITs space stems from the simple fact that real estate in Singapore is so closely tied to its economy. Singapore ranks among the world’s most successful cities. In land-scarce Singapore, as long as we continue to attract global companies to set up headquarters here, foreign investments and talent, the demand for property will continue to increase. These factors will keep real estate prices up, be they office rents or industrial spaces.
Since our aim is to build a dividend income portfolio using REITs over the long haul – and we mean years, not months – we’re keeping a longer-term perspective on REITs.
We find that the Syfe REIT+ portfolio allows us to do just that with the flexibility it provides. There’s no minimum investment and you can withdraw anytime for free. If you’re planning to dollar cost average (DCA), you’ll be happy to know that there are no brokerage charges no matter how frequently you DCA.
For us, we love how effortless it is. We’ve earned a 16.4% return doing nothing at all. Even our dividends are reinvested automatically for us. We hardly need to check our REIT+ portfolio, and even when markets turn volatile, we’re never too worried since we know we’re invested in a diversified basket of quality REITs like your Mapletrees, CapitaLand, Ascendas etc.
If you’re keen to create a Syfe REIT+ portfolio, enjoy free investing when you use our referral code FRUGALFOX. You will get SGD $30,000 managed FREE for 6 months. This works out to $75 saved in fees if you invest $30,000, so don’t forget to use it if you’re signing up.
The Frugal Fox 