Most investors who want to earn a passive income often invest in Singapore REITs, a great asset generating dividend incomes. RIET provides retail investors a chance to invest in real estate without having a huge capital outlay.
In Singapore, REITs are listed on the Singapore Exchange (SGX). So when you invest in REITs, you become a property owner who will receive income that the property generates. Once the rental income is collected, it is disbursed to the investors in dividends.
The Syfe REIT+ portfolio is one of the best portfolios to invest with if you want to put your money in REITs. Syfe is a Robo advisor whose main aim is to automate your REIT investments. Read on on the best REIT in Singapore.
What are REITs?
Real Estate Investment Trusts or REITs own or finance income-generating real estate across different property sectors. The real estate companies have to meet different requirements to qualify as REITs. REITs are traded on major stock exchanges and offer different benefits to investors.
REITs provide similar investment objectives as mutual funds, and it makes it possible for everyday Singaporean to invest in different industries without having to have huge capital. REITs allow investors to invest in different portfolios in real assets the same way you can invest in other industries.
There are different types of REITs and they include:
Equity REITs
Most of the REITs available for trading are equity REITs. These REITs operate or own income-producing real estate. Equity REITs are mostly referred to as just REITs in most markets.
mREITs
Also known as mortgage REITs, they provide financing or income-producing real estate by buying or originating mortgages and other mortgage-backed securities while earning an income for the interest of the investments.
Private REITs
Private REITs are exempt from the SEC registration, and they do not trade on the national stock exchange.
Public Non-listed REITs
PNLRs are REITs registered with the SEC but cannot trade on the national stock exchanges.
Pros and Cons of Investing in REITs
The Pros
- They are highly liquid
- They offer high yield dividends
- They have a diversified exposure portfolio
The Cons
- The dividends are taxed as ordinary income
- REITs are sensitive to interest rates
- There are different risks associated with different properties.
Things to Consider in Investing in REITs
Here are some of the factors to consider when investing in REITs:
1. Quality of the Portfolio
Before investing, know if the properties are in a high-growth sector and location. Properties in prime locations are likely to make a higher income than real estate in poor locations.
It is also important to consider REITs with properties across different geographies. This will offer diversification, and keep in mind that the trusts could face foreign exchange fluctuations.
2. The Dividend Yield
In most cases, this is the first thing you should look at before you invest. While every investor is looking for REITs with a high dividend yield, it is important to examine its track record.
Has the REIT dividend remained stable, or are they rising dividend per share year after year? Or do the REIT yields fluctuate through the years?
To maintain a steady income, make sure you do for REITs with steady income and dividend per share yearly. It is a better investment than REITs dividend that keeps fluctuating.
3. Potential Growth in Distribution Per Unit
There are instances where a REIT will raise its dividends through asset enhancement activities.
There are ways in which managers convert empty spaces to generate returns or acquire other properties. Therefore, it is important to consider the extent to which a REIT does this.
4. Gearing Ratio
This is the proportion of total debts to the total assets. The leverage limit for REITs is 45%, which means a gearing ratio in excess should be considered high.
It would be best if you looked for a low gearing rate to ensure sufficient debt space for development and acquisitions.
5. Management Track Record
A strong management track record will go a long way to ensure sustainable growth and increase yields for a REIT.
6. Interest Rates
A rising interest rate will make a REIT look less attractive, and in most cases, it has taken on a debt that it must repay. In such circumstances, you will need to consider REITs with fixed-rate loans.
Some debts are well distributed and have a high proportion of not pledges and collateral assets.
What is Syfe REIT+ and How Does It Work?
Syfe REIT+ was launched in partnership with SGX as the first portfolio that allowed investors to easily invest and track the SGX iEdge S-REIT Leaders Index, which is the most popular indices on the Singapore market.
Syfe REIT+ provides access REITs from all property sectors in Singapore. These sectors include industrial, retail, data center, hospitality, office, and health care. The REIT has diversified its exposure, so you do not need to worry about the different shocks in any sector.
A great example is when REITs were affected by the pandemic. Still, the REIT+ portfolio was cushioned by the industrial REITs, which have remained on top of their game due to the growth trends in data centers, logistic spaces, and business parks.
Syfe REIT+ portfolio holds 20 of the best-known Singapore REITs, including:
- Mapletree Industrial Trust
- Ascendas REIT
- Keppel DC REIT
- CapitaLand Integrated Commercial Trust
- Fraser CenterPoint Trust
How Syfe+ Works
The iEdge S-REIT Leaders index has 27 REITs, and the REIT+ is optimized for 20 REITs in its portfolio. The Syfe REIT+ is designed to balance market representation and trading liquidity. The REIT aims to achieve minimal tracking error while minimizing the trading costs.
The REIT+ does not fully replicate the iEdge S-REIT Leaders index. It uses an optimization tool designed to construct an index tracking portfolio.
This results in the REIT+ portfolio holding only 20 REITs from the Index. It is diversified across different sub-sectors in Singapore and has a tracking error of 0.5% to the Index.
The Syfe+ REIT is rebalanced twice every year, and during the semiannual rebalancing, some REITs may be removed from the portfolio, and others added.
The index constituents will have their index weights capped at 10%. The Syfe REIT+ portfolio will track the index changes and adjust the portfolio accordingly.
What are the Pros and Cons of Investing in Syfe REIT+?
The Pros
- Uses the dollar-cost averaging method to invest
- Ideal for passive investors that do not have time to do their due diligence on each REIT
- Ideal for a small investor
- Diversified portfolio
The Cons
- You pay the management fee every time you trade
Should You Invest in Syfe REIT+?
Yes.
The Syfe+ REIT works similarly to ETFs. The REIT+ solves two main problems; you will pay fewer fees than investing in individual stocks or ETFs. The portfolio charges a management fee per annum but does not charge brokerage fees, allowing you to dollar cost average effectively.
The Syfe REIT+ also does not require a minimum deposit which means anybody can start investing there.
Here are some of the major features for Syfe REIT+ that make it one of the best places to invest your money.
Regulated by the Monetary Authority of Singapore
Syfe REIT+ is regulated by the Monetary Authority of Singapore and is licensed under the Capital Markets Services License for retail fund management. This means that it has complied with the stringent standards and regulations set by the MAS for financial and Investment service companies.
Dividend Payout Option
One of the reasons the Syfe REIT+ is quite attractive is its regular dividend income stream. You can opt for the dividend payout option but with conditions when you invest in the REIT.
The payout is only available to clients with a minimum of $20,000 on their portfolio.
Low Fee Structure
Another benefit of investing in the Syfe REIT+ is its low fees structure. If you have a portfolio of $10,000, your annual management fee p.a is $65, which is quite fair.
The prices are always fixed based on the tier.
Risk Management Option
Syfe uses the Automated Risk-managed Investment (ARI) strategy, which combines the best investment approaches, which include: The Risk Parity Portfolio (RP) and Global Market Portfolio (GMP). With these, you can invest in 100% REITs and another portfolio with REITs mixed with bonds.
How to Invest in Singapore REITs with Syfe
Unlike when investing in individual REITs, where you have to meet the minimum investment amount, Syfe REIT+ requires no minimum investment amount. You can access the same portfolio with any amount you might have.
The Syfe REIT+ also doesn’t charge a brokerage fee. Investors can take advantage of the dollar cost average into the portfolio to build their REIT holdings after every month.
This strategy might not make sense for a DIY portfolio because local brokerages charge $10-$25 for every transaction.
REIT+ also does not have a long period. This means that investors can easily withdraw their funds at any time at no extra charge.
If you want to start your passive investment journey, create a Syfe account using the code SYFEWAIVER to get six months of free investing for your first $30,000.
What Is the Portfolio Performance with Syfe REIT+?
If you are an investor with a high-risk appetite and a long investment horizon, you should consider investing in the 100% REITs portfolio.
This portfolio has long-term potential returns. Its average returns over the past ten years have been 9.58 %
If you have a conservative risk appetite, on the other hand, and do not want a portfolio experiencing excessive fluctuations, the Risk-managed portfolio is your best bet. This portfolio has a slightly lower return but experiences low volatility compared with the 100% REITs portfolio.
Conclusion
Syfe REIT+ is the best investment option for passive income investors looking to put their money in Singapore REITs. The portfolio offers low management fees with no brokerage fee. In addition, the portfolio has exceptional risk management and rebalances every six months.
Key Takeaways
- The Syfe REIT+ follows the iEdge S-REIT Leaders index
- The REIT+ has an optimized portfolio of 20 REITs
- It has the 100% REITs portfolio and the Risk-managed REITs portfolio that include bonds
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