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In part one, we explored the importance of remaining calm when portfolios are hit by market shocks and negative surprises. In this second part, we’re going to tackle the opposite challenge: navigating the fear of missing out (FOMO) when markets are booming.
For financial advisors, this is one of the most common client conversations. For retail investors, it’s a difficult emotional hurdle that most fail to mount. For both parties, having an experienced team of active managers that have lived through bull and bear markets can help.
In the U.S., Dalbar research from the Quantitative Analysis of Investor Behavior Study shows that between 2001 and 2020, the S&P 500 produced annualised returns of 7.5%, real estate investment trusts (REITs) delivered 9.5%1 and average investors achieved just 2.9%. In Australia, Morningstar’s ‘Mind the gap’ research2 reaches similar conclusions.
Typically, retail investors will sell out at, or near, market lows and buy in at, or near, market peaks due to fear of missing out. With REITs now showing improving returns across office, retail, industrial and logistics, and alternative property sectors, for many investors the temptation to chase the return is back.
On the surface, FOMO looks like greed: A rush to buy because others appear to be making easy money. Underneath lies a deeper emotion - the fear of being left behind. Behavioural finance research shows that loss aversion, or the pain of missing out, often feels twice as strong as the pleasure of making a gain. This is often how bubbles form.
Since ‘Liberation Day’ in early April 2025, the shift from caution to optimism is evident in many areas of the market. These factors risk triggering a classic FOMO cycle.
For REIT investors, it’s a little different. After a bruising 2022–23 when rising interest rates depressed valuations, the recovery is gathering momentum. Cap rates have stabilised, rents are firming in logistics, shopping centres are crowded, and the office recovery is underway.
As highlighted in the Dexus Q3 2025 Australian Real Asset Review, “Faced with a recovery in real estate returns, it will be interesting to see how quickly Fear of Acting Too Early (FATE) gives way to Fear Of Missing Out (FOMO).”
Selling at the top and buying at the bottom has everything to do with skill and active portfolio management. Chasing excellence traps investors and ‘leaving money on the table’ is part of sensible investing.
Selling a REIT at a reasonable profit, even if it later goes higher, is a success if income streams are maximised and risks are reduced.
When markets run, prices can look like signals of opportunity but they’re often just noise. Anchoring to data points like future cash flows, rent growth and cap rates protects against overpaying.
For example, in early 2023, London-listed Urban Logistics REIT traded at a >25% discount to net tangible assets. There was a lot of fear in property markets, which delivered a margin of safety to its purchase when we added it to the Dexus Global REIT Fund (DXGRF). Since then, it has been taken over by a larger UK REIT peer and ultimately contributed materially to DXGRF’s outperformance over this time. By anchoring on value rather than price, active managers like Dexus were able to invest before the sector rerated.
FOMO thrives on short-term enthusiasm, often backed by what the professionals call ‘hockey stick’ charts. REIT investing is different or at least should be. Conservative investors instead focus on the steady compounding of income and capital because they know the power of it.
Had you invested $10,000 in the ASX 200 AREIT index in 2000 and reinvested distributions, it would now be worth roughly $45,000. During that time, you would have endured the dotcom crash, the global financial crisis (GFC) and the COVID-19 pandemic; each of which offered the temptation to sell at the bottom.
In 2006–07, Australian listed property trusts geared aggressively into offshore assets. FOMO led investors to ignore risk. The result was a huge collapse in the sector and massive shareholder losses.
These lessons were not lost. Today, REIT balance sheets are stronger, gearing is lower, and assets are more diversified. The sector has learnt from its past mistakes and is a lesson to investors currently getting carried away by the promise of rich returns elsewhere.
History shows us what happens when prices become detached from valuations, and the power of narrative overwhelms reason. Help clients to learn its lessons so they can better take advantage of what Charles Macay termed ‘the madness of crowds’ in his popular book3.
Social media feeds and financial news rarely reward patience. Instead, they fuel urgency with headlines.
Office REITs were written off in the press in 2023 amid remote-work fears. Yet high-quality landlords such as CapitaLand Integrated Commercial Trust and Daiwa Office Investment Corporation, owned in the Dexus Global REIT Fund, are demonstrating resilience in occupancy as supply-demand dynamics favour landlords in their respective markets and tenants seek out higher quality space. The same has occurred in once empty airports now enjoying a travel rebound.
Acting on headlines would have led to panic selling at the worst moment. Best in class managers anchor decisions on research, not headlines.
Most investors and advisers know their emotions undermine performance, and still most fail to overcome the power or FOMO as share prices boom or resist the fear of further falls when they crash.
Active management - where experienced, seasoned professionals manage your REIT portfolio on your behalf - helps investors capture the upside while managing downside risk.
The Dexus AREIT Fund, for example, provides exposure to a diversified basket of Australian REITs. The portfolio is actively tilted toward undervalued sectors while trimming overheated ones. Reducing exposure to retail REITs during the pandemic while adding logistics at depressed prices is a good example of our approach.
The Dexus Global REIT Fund (GREIT) extends this discipline internationally. Investors gain access to high-quality landlords like LondonMetric (UK logistics) and Prologis (US logistics), while risk management protects against sharp drawdowns.
Instead of chasing headlines, these funds benefit from structured diversification, valuation-anchored decisions, and experienced managers who act early and decisively.
Most investors underperform because emotions cloud judgment. With funds like these, advisers can help their clients participate in the recovery of global property markets without the risks of FOMO and FATE.
Read part one of the series here.
DISCLAIMER
Investing, like life, is full of surprises. Whether those surprises are rewarding or terrifying, our response to them has a large bearing on the future investment returns of our clients.
When a business fails, it is usually due to excessive debt. In the 2008 financial crisis, this was a lesson the AREIT sector learned the hard way. At the time, average AREIT gearing was above 40%. For a supposedly conservatively managed investment designed to deliver stable regular dividends, the figure was too high.
Delivering one of the highest positive earnings revisions this reporting season, the case for Australian Real Estate Investment Trusts (AREITs) was once again made with conviction. Offering yield, growth and value, AREITs are positioned to continue to outperform.
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