singapore reit etf

The Ultimate Beginner’s Guide to Investing in Singapore’s REIT ETFs

Investors looking to jump into REIT action have the best time to do so because both REITs and S-REITs (mainly focus in Singapore) are at low prices. Many REITs encountered stagnant growth in the country as of writing, forcing them to look for opportunities elsewhere. Therefore, it’s a great time as any to pool your cash with other investors in REIT ETFs.

If you have yet to learn about REIT ETFs and the top reasons to build your own REIT portfolio, here’s a short guide to get you started.

What is REIT ETF?

REIT exchange-traded funds (ETF) invest in stocks of Real Estate Investment Trusts. REITs invest in residential, industrial, and commercial real estate properties, including property management companies. These ETFs are very useful for investors as they provide exposure to an asset class that is not easily accessible through an individual stock or by purchasing a mutual fund.

REIT ETFs are a great way to diversify a portfolio and provide investors with steady monthly distributions. For example, the FTSE NAREIT U.S. REIT Index, an example outside the Singapore Stock Exchange, is composed of 225 stocks and provides exposure to the REIT market in the United States. Singapore has equivalent ETFs that follow similar tracker performance.

In the last five years, Singapore Real Estate Investment Trusts (REITs) have experienced positive average annual growth as reported by Singapore Exchange. Some dividend prices have fluctuated through the years, but the pandemic’s onset had many investors safeguarding their investments through REITs and REIT ETFs.

 

Why Invest in Singapore REITs?

Singapore’s real estate market performance hasn’t reached an all time high in the last few years, but many analysts and investors are confident that it can increase at a slow but sure pace in the next few years. With this in mind, there has never been a better time to invest in Singapore REIT ETFs

To motivate you further, here are a few more reasons why you should consider REIT ETFs that follow the top REIT Index FTSE and other REIT ETFs listed in the SGX .

Instant Diversification

A REIT ETF is an exchange-traded fund that invests in real estate investment trusts. It has a diversified portfolio of REIT shares to gain profit and stabilize monthly cash flow. Thus, it guarantees instant diversification for investors. REIT ETFs offer instant diversification because they do not invest in one REIT. They invest in a basket of REITs—which can range from 5 to more than 100 different REITs. For example, the Phillip SGX APAC Dividend Leaders REIT ETF tracks 30 of Singapore’s leading REITs with the highest-yield dividends, ensuring diversified assets while tracking Singapore’s top REITs.

Passive Income

REIT ETFs generate passive income through dividends paid by the REITs in the fund. For example, if you own a REIT ETF that invests in commercial real estate, like the Vanguard REIT ETF, it will pay out dividends periodically to shareholders based on the company’s profits. These dividends are paid out to shareholders as a percentage of their holdings in the fund.

Professional Management

Investors can put their money in an ETF without having to worry about the day-to-day management of the fund, which is taken care by an ETF professional management company. These companies are responsible for investing in stocks and bonds on behalf of clients, and also monitor performance and liquidity levels within these funds.

Cost-Effective

Investing in ETFs is a great way to save on fees and gain access to assets that would otherwise be too expensive for the individual investor to purchase. ETFs provide investors with low-cost exposure to assets like commodities and stocks that they might not otherwise be able to afford on their own.

Find out how to invest in property without owning one.

5 Best REIT ETFs To Invest in in Singapore

If you’re just getting started, here are five of the best REITs to consider including in your portfolio.

1. Phillip SGX APAC Dividend Leaders REIT ETF (SGX: BYJ) (SGX: BYI)

  • Expense Ratio: 0.91%
  • 10 Day Average Volume: 5,566.67
  • Dividend Yield: 3.10%

The Phillip SGX APAC Dividend Leaders REIT ETF tracks Asia’s 30 highest dividend-yielding REITs. These include Link REIT, Scentre Group, and CapitaLand Integrated Commercial trust. Most of the 30 REITs the Phillip SGX APAC Dividend Leaders REIT ETF are large enough to reach S $36 billion in total value. As it focuses on leading REITs rather than niche industries, the Phillip SGX APAC Dividend Leaders REIT ETF allocates its fund in various diversified asset classes with 27.7% dedicated to retail ETFs.

Five Year Market Performance
2021 S$0.008
2020 S$0.0123
2019 S$0.0325
2018 S$0.0145
2017 S$0.025


2. NikkoAM-StraitsTrading Asia Ex Japan REIT ETF (SGX: CFA) (SGX: COI)

  • Expense Ratio: 0.60%
  • 10 Day Average Volume: 524,623.5
  • Dividend Yield: 0.28%

The NikkoAM-StraitsTrading Asia Ex Japan REIT ETF tracks the FTSE EPRA Nareit Asia ex Japan REIT, represents general real estate equity trends in Asia and Japan. The index contains up to 43 constituents that vary depending on period. In 2021, the index has a total valuation of US $70.2 billion, with each one having a market weightage cap of 10%. Assets in this fund include CapitaLand Integrated Commercial Trust, Ascendas REIT, and Link REIT. 

The fund diversifies its assets to three major divisions, retail REITs that take up 36.3%, industrial REITs that take up 30.5%, and office REITs that take up 12.7%

Five Year Market Performance
2021 S$0.004
2020 S$0.005666
2019 S$0.0054623
2018 S$0.005
2017 S$0.01128


3. Lion-Phillip S-REIT ETF (SGX: CLR)

  • Expense Ratio: 0.6%
  • 10 Day Average Volume: 732,323.58
  • Dividend Yield: 4.47%

The Lion-Phillip S-REIT ETF tracks the Morningstar Europe REIT Yield Focus Index that filters out high-yielding REITs with a proven track record in providing dividend yields and profitable real estate investments. The fund has 20 constituents listed in the SGX and concentrates mainly in Singaporean real-estate investments. Each of these constituents contribute at least 10% to the fund’s entirety. in addition, the fund has a less than 0.3% tracking error, indicating accurate index tracking in most periods.

Five Year Market Performance
2021 S$0.0092 
2020 S$0.0037
2019 S$0.0189
2018 S$0.004
2017 n/a


4. CSOP iEdge S-REIT Leaders Index ETF (SGX: SRT) (SGX: SRU)

  • Expense Ratio: 0.60%
  • 10 Day Average Volume: n/a
  • Dividend Yield: 5.8%

The CSOP iEdge S-REIT Leaders Index ETF had its inception in 2008 and tracks the performance of the iEdge S-REIT Leaders Index, which focuses on the most liquid REITs in Singapore only. The fund has 28 constituents in total, with the top constituents as follows: Capitaland Integrated Commercial Trust, Ascendas REIT, Mapletree Logistics Trust, Mapletree Industrial Trust, Keppel DC REIT and Keppel REIT. Each constituent makes up at least 5-10% of the investment trust. 

This fund is suitable for investors that look for capital growth and income, need a diversified basket of REITs tracking the iEdge S-REIT Leaders Index, and are confident that Singapore estates will increase in value over time.

Five Year Market Performance
2021 n/a
2020 n/a
2019 n/a
2018 n/a
2017 n/a


5. UOB APAC Green REIT ETF (SGX: GRN) (SGX: GRE)

  • Expense Ratio: n/a
  • 10 Day Average Volume: 31,346.17
  • Dividend Yield: 4.25

The UOB APAC Green REIT ETF is a pioneering ETF that focuses on green real estate investments. It tracks teh iEdge-UOB APAC Yield Focus Green REIT Index, which tracks 50 high-yielding REITs in Asia-Pacific and Oceania that has higher-than-average environmental performance and characteristics anchored on the GRESB’s green real estate investment standards on both sustainability and liquidity.

These standards include direct and indirect greenhouse gas emissions, energy consumption, and water consumption.The iEdge-UOB APAC Yield Focus Green REIT and the UOB APAC Green REIT ETF show investor confidence in the rising global demand for sustainable properties.

Five Year Market Performance
2021 n/a
2020 n/a
2019 n/a
2018 n/a
2017 n/a


Here’s a table that summarizes all these five REIT ETFs for convenient comparisons.

Benchmark Index Distribution Expense ratio
Phillip SGX APAC Dividend Leaders REIT ETF iEdge APAC ex Japan Dividend Leaders REIT Index Semi-Annual 0.91%
NikkoAM-StraitsTrading Asia Ex Japan REIT ETF  FTSE EPRA Nareit Asia ex Japan Net Total Return REIT Index Quarterly 0.60%
Lion Phillip S-REIT ETF Morningstar Singapore REIT Yield Focus Index Semi-Annual 0.54%
CSOP iEdge S-REIT Leaders Index ETF iEdge S-REIT Leaders Index Semi-Annual 0.60%
UOB APAC Green REIT ETF iEdge-UOB APAC Yield Focus Green REIT Index Quarterly n/a


From this table, each of these five REIT ETFs provide a quarterly or semi-annual dividend distribution. The Lion Phillip S-REIT ETF is one of the most accessible and cost-effective ETFs available because of its low expense ratio. On the other hand, the Phillip SGX APAC Dividend Leaders REIT ETF has the highest expense ratio available due to the ETFs’ massive constituents.

modern-house-concrete-floor-with-white-copy-space-real-estate-sale-property-investment-concept

Other Important Things to Know about REIT ETFs

What’s an ETF?

An exchange-traded fund is a security that tracks an index, a commodity, bonds, or a basket of assets. An ETF is an investment fund that trades like a common stock on the stock market. ETFs are attractive because they provide diversification and lower cost than mutual funds. The first ever ETF was the Standard & Poor’s Depositary Receipt (SPDR), which became available in 1989.

Can You Invest in REITs Outside of ETFs?

Real estate investment trusts, or REITs, are companies that own income-producing real estate properties. Therefore, you can invest cash directly with them just as you would buy shares of a company.

A REIT is a company that owns income-producing real estate properties and distributes the profits to shareholders. This is done by charging the tenants rent on the property and then distributing those funds to shareholders. This allows investors to invest in both the stock of the company and in real estate without having to buy or sell individual properties themselves.

How Do ETFs Perform Against Stocks?

There are many similarities between ETFs and stocks. Both have a market price, and both can be traded on the stock exchange. However, there are some differences as well. ETFs are more tax-efficient than stocks because they only have to pay out capital gains taxes when they sell their individual stocks, not on an annual basis. However, investors do not have any voting rights or other shareholder privileges unlike stocks.

How Do ETFs Perform Against Mutual Funds?

Mutual funds are managed by a professional portfolio manager who makes decisions about what to buy and sell in order to meet the fund’s investment objective. Mutual funds are also bought and sold at the end of each day on an exchange like stocks. On the other hand, ETFs trade like stocks during the day while they are open for trading, but unlike stocks, they cannot be traded after hours.

Closing

REIT ETF investing in Singapore is the most cost-effective way to purchase REITs without the added cost and taxes. This complete guide and our five top picks for excellent REIT investing gives you a great starter towards making the best REIT investments today.

Key Takeaways

  • REITs are companies that purchase and manage properties in various industries. They have respective shares included in most ETFs
  • REIT ETFs concentrate on REITs that offer dividends to shareholders. These allow you to purchase an assortment of REIT shares simultaneously
  • With Singapore’s REITs looking towards overseas expansion, it’s a great time as any to start investing in REIT ETFs and S-REIT ETFs today.

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