• All blog entries
    • Calculators
    • Case studies
    • Cost of living
    • CPF Are You Ready?
    • CPF Matters
    • Credit Management
    • e-Learning
    • Estate Planning
    • Events
    • Financial advisers
    • High Networth
    • Insurance
    • Investments
    • Letters to the Press
    • Magazines
    • Others
    • Retirement Planning
    • Scams
    • Surveys
    • Tragic Stories
    • Unethical sales process
    • Videos
  • Legal
  • Testimonies
    • Individual testimonies
    • Gallery
  • My Account
Hi, looking for a fee-based financial planner in Singapore? Read this article now!
  • Home
  • About
    • About Wilfred Ling
    • Why do you run your own professional financial planning practice?
  • FAQs
    • FAQs on Wilfred Ling’s Financial Services
    • FAQs on Financial Planning
    • FAQs on Investments
    • FAQs on Insurance
    • FAQs on Estate Planning
  • Services
    • Overview
    • Retirement Planning
    • Investment Portfolio Management
    • Insurance Planning
  • Fees
  • Cool Tools
  • Contact
  • Subscribe
You are here: Home / CPF Are You Ready? / Volatility of Real Estate Investment Trusts (REITs) is higher than stocks

Volatility of Real Estate Investment Trusts (REITs) is higher than stocks

5, June 2021 by Wilfred Ling Leave a Comment

In my experience, many retirees like to invests in REITs. Some of the reasons many retirees invests in REITs are:

  1. They tell me that REITs are safer because underlying is backed by properties.
  2. REITs are safer because of rental income which is easy to understand.
  3. Even if the REITs' prices drop, it is ok because the investor still get an income and as long as they don't sell it, the capital lost is just paper lost.

But what they don't realised is that it has a volatility that could be even higher than stocks!

Consider the chart below which is a comparison between the volatility of Nikko STI ETF and Lion-Phillip S-REIT ETF. You'll notice that that the volatility of the REIT ETF far exceeds the broad market during the covid19 financial crisis for nearly six months in 2020.

So is REIT safe? I think it is better to address the misconception.

  1. The underlying is backed by properties and also financed by debt. Do not forget about the debt! Much of this debt could be short term loans. Remember during the financial crisis some REITs got into big trouble because they cannot refinance their debt when credit dried up.
  2. The pursue of income is what behavior finance called 'Self-Control'. It is an irrational behavior. What is more important is the total return. That is the capital is also important which brings me to the next point...
  3. There is no difference between realised and unrealised losses. In the west, these two values are not the same because of capital gain tax or tax loss harvesting. In Singapore, there is no tax on gain and tax refund on losses. Hence, a paper lost is not virtual - it is reality! So do not bluff yourself into thinking a paper lost is merely virtual.

That is why financial education is so important.

 

Like this article? Subscribe to my newsletter below for more.

Get regular Tips on Financial Planning. Free subscription for 3 years. Covers all aspect of financial planning such as 'How much salary you should have?', 'How to avoid insurance that is not suitable?", 'What are the retirement planning methods?", etc

Share this:

  • Tweet
  • Print

Related

Filed Under: CPF Are You Ready?, Investments

What do you think? Leave a comment. Cancel reply


WILFRED LING, CFA

WANT TO GET REGULAR TIPS ON FINANCIAL PLANNING?

JOIN with thousands of other subscribers in getting tips on all aspect of financial planning such as "What is the minimum salary required?", "How avoid insurance that is not suitable", etc.


WILFRED LING IN THE NEWS

Click HERE to find out more.


THE KIND OF CLIENTS I AM LOOKING FOR

NEW TO US?

Learn how you can fully benefit from this massive website: HERE

For Registered Users Only (free)

  • How to identify high performing unit trusts in 3 steps (Webinar) 3/9/2021
  • Financial Planning – Christian Perspective Part 2 (Webinar) 14/8/2021
  • How and what to invest now? (Webinar) 22/7/2021
  • Financial Planning – Christian Perspective Part 1 (Webinar) 10/7/2021
  • iFAST Monthly Investment Update -July 2020 7/7/2020

View All

For Clients Only

  • Video Message to Clients 30/12/2021
  • Exclusive client-only Investment Update Webinar by Wilfred 26/11/2021
  • JPMorgan Guide to Market Q2 2020 15/4/2020
  • JPMorgan Perspective Q2 2020 15/4/2020
  • JPMorgan Guide to Market Q1 2020 5/2/2020

View All

Top Posts

  • Access Information & Sign Up Page
  • Why You Always BUY HIGH In Investments? One of the most common feedback I hear is this,  “Wilf...
  • Strange way of how CPF Interest is calculated & retirement planning CPF has a rather strange way of calculating interest. I...
  • CPF: How to Accumulate $1m in your CPF by 57? I read from the CPF’s AREYOUREADY facebook about a man...
  • How to generate passive income for your retirement? (package details) Why you should have a retirement plan? A whopping 78%...

Recent comments

  • honest_me on Cancer patient ends up with $33,000 bill after insurer refuses to pay for drug & what you must do to avoid this situation
  • LittleTiger on Nomination in insurance policies
  • Josephine Pek on Nomination in insurance policies
  • chonghoong lim on Strange way of how CPF Interest is calculated & retirement planning
  • Jeremy Tan on Strange way of how CPF Interest is calculated & retirement planning
  • Janice on CPF Retirement Sum Scheme

To be notified of new blog post, like this facebook page

To be notified of new blog post, like this facebook page

Read articles based on different categories

Investment Login

iFAST Central: Login

iFAST Prestige: Login

Navigator: Login

Chartered Financial Analyst

CFA

Chartered Financial Consultant

ChFC

Featured Blogger

IM$avvy

© Copyright 2006-2022 Wilfred Ling

This advertisement or publication has not been reviewed by the Monetary Authority of Singapore

hollow-nasty
hollow-nasty
hollow-nasty
hollow-nasty