Reading A Random Walk Down Wall Street, the author suggests allocating a small portion of assets to REITs (Real Estate Investment Trusts) regardless of age.

The underlying logic of REITs is straightforward: these are funds that pool investor capital through securitization and are managed by specialized institutions to invest in commercial real estate. Since REITs are listed on stock exchanges and can be publicly traded, they combine the attributes of real estate investments with those of stock investments. Investors primarily value REITs for their dividend returns, although their value is also affected by economic cycles.

REITs are one of the investment products I understand reasonably well. Singapore is also a mature market for REIT investments, so I’ve been investing in them regularly. While REITs operate with high leverage, they don’t perform well in high-interest-rate environments. Despite the strong performance of U.S. stocks recently, my REITs are still showing a 7-8% loss. However, I’m not overly concerned. The reasons I continue investing are:

1. Theoretically, REITs carry slightly less risk than stocks (aligning with my risk tolerance, as I’m willing to lower expected returns to reduce risk).

2. They provide some degree of risk hedging (which is also one of the reasons Random Walk recommends them).

3. Purely due to home country bias.

Singapore has a well-regulated REIT market, and it’s easy to witness the vibrancy of its economy—whether it’s the CBD, shopping malls, hospitals, industrial parks, or warehouses and logistics hubs. Seeing REIT signs on buildings around the city gives me confidence in these investments.

I’ve been using Syfe robo-advisor for my REIT investments. However, Syfe is shifting more towards brokerage services, and their platform fees have increased (from 0.5% to 0.55%~0.65% + GST). I’ve been considering alternative platforms, but options are limited. Index ETFs typically have an expense ratio of around 0.6%, and factoring in dollar-cost averaging fees, they’re not cheaper either. I recently noticed FA platforms promoting REIT products with management fees of over 1%. It’s not outrageous, considering they provide services and emotional value.

The Singapore Exchange (SGX) only lists about 40 REITs, so maintaining a portfolio doesn’t seem too costly. However, passive investment in Singapore REITs is still relatively expensive. This could be due to the small market size, which drives up operational costs, making it hard to achieve the low costs seen in broad index funds.

For now, I’ll continue using Syfe. Once my funds accumulate to a certain level, I might consider using a brokerage to directly hold ETFs under a CDP account.