Why This 39-Year-Old Singaporean Millennial Won’t Touch REITs

The REIT Myth: Why Most Investors Think They Are "Safe" (But They Aren’t)

Real Estate Investment Trusts (REITs) are one of the most popular investment vehicles in Singapore.

Ask any investor why they invest in REITs, and the answer is almost always the same:

• Stable dividends
• Lower risk than stocks
• A "defensive" play as it is in the real estate market

But what if I told you REITs are not as safe as most people believe?

At 39, I’ve realized that many investors—including Singaporean millennials—are making a big mistake by blindly assuming REITs are a "safe" investment and love the income that it pays.

Today, I’m breaking down why I no longer invest in REITs, what actually happened during market crashes, and what I prefer instead.

Problem: The False Sense of Security in REITs

The biggest myth about REITs is that they provide stability in turbulent markets.

But if that’s true, why did REITs crash hard during COVID (2020) and the 2022 interest rate hikes?

Let’s look at what actually happened to some of Singapore’s REITs:

• COVID Crash (2020): -43.98% (from $2.91 to $1.63)
• Interest Rate Hike (2022): -15.88% (from $2.33 to $1.96

• COVID Crash (2020): -41.3% (from $2.59 to $1.52)
• Interest Rate Hike (2022): -25.32% (from $2.33 to $1.74)

• COVID Crash (2020): -29.19% (from $2.98 to $2.11)
• Interest Rate Hike (2022): -20.52% (from $2.68 to $2.13)

Key takeaway: If you go into REITs for stable income and stability in prices and they are supposed to be "defensive," why did they fall just as much as regular stocks?

The Risk-to-Reward Ratio is Worse Than You Think

Let’s break this down from a risk vs reward perspective.

REITs can lose -20% to -40% in a downturn.

But investors are expecting them to only pay 5-7% in dividends per year.

Growth stocks may have similar risks—but can return 20-30%+ in capital gains.

Here is a simple example

Lets take a look at some performances of some growth companies during the past 5 years

Compare the above past 5 years' results to the REITs past 5 years' results. It is a huge difference.

If REITs can crash just as hard as growth stocks but only pay 5-7% in dividends, is it really worth it?

I’d rather put my money in companies that can compound 20-30% per year, rather than "playing it safe" with an asset that isn’t actually safe.

REITs Are Also Impacted by Interest Rates

Another major risk to REITs is their dependence on interest rates.

When interest rates rise, the cost of borrowing goes up, which affects REITs in two ways:

Higher borrowing costs = REITs struggle to expand their property portfolio.

Dividend yields become less attractive = Investors shift to safer bonds instead.

This is exactly what happened in 2022—interest rates spiked, REITs dropped.

Meanwhile, growth companies with strong earnings growth still managed to bounce back faster regardless of the interest rate environment.

This shows that if a business is profitable and with a wide enough moat, they are even able to weather a high interest rate environment.

When interest rates decline, REITs are expected to perform well. However, companies that have already thrived in a high-interest rate environment are also likely to continue performing strongly.

What I Invest in Instead

Instead of REITs, I focus on:

High-growth companies with strong earnings growth.

• Example: Microsoft, Google, or Amazon have historically outperformed REITs over the long term.

Index funds like the S&P 500 or World Global Stock Index (VWRA) for long-term compounding.

• These have outperformed REITs over time.

Both options offer a better risk-to-reward ratio, meaning they carry a similar level of risk while delivering higher potential returns over time.

Additional Factors For Consideration

If you are nearing retirement and need consistent income, REITs can still be a useful tool because they provide a steady dividend yield. However, the blindside many investors don’t consider is that REITs are still volatile assets, and capital drawdowns are very possible—as we’ve seen during market crashes like COVID and interest rate hikes. So invest with both eyes open.

Now, if you’re still young and have over 10 years before retirement, focusing only on income plays like REITs might hurt your long-term returns.

1. Investing in REITs with only dividends would grow your $100,000 to $320,714—a much lower return than investing in growth stocks.
2. Investing in Growth Stocks instead would grow your $100,000 to $964,629—about 3x more than REITs.
3. If a REIT offers no capital growth, your returns are significantly limited—you’re relying only on dividends rather than the power of compounding capital appreciation.

Conclusion: If a REIT isn’t growing in value and only provides a 6% yield, the long-term returns will be far lower than high-growth stocks. This is why focusing only on dividends can limit wealth-building potential. Instead of looking for stable income now, long-term investors with sufficient time horizon should maximize compounding returns for future financial freedom.

Do You Still Think REITs Are Worth It?

At 39, I’ve realized that blindly chasing dividends without considering risk is a mistake.

If REITs are crashing just like stocks but offering lower returns, why not aim for higher growth instead if your investment time horizon allows.

What do you think? Do you invest in REITs, or are you reconsidering? Drop your thoughts in the comments!

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