How Investing in Real Estate Can Help You Build a Diversified Portfolio

How Investing in Real Estate Can Help You Build a Diversified Portfolio

15th July, 2022

2 minutes, 44 seconds read

According to Fundrise and Investopedia, since April 2020, the stock market around the world has not been at its best. Investors are voraciously searching for ways to reduce fluctuation in their portfolios to make them more resilient. The option of diversification aids this process. Below, we explore some of the ways you can glean from diversifying into real estate.

What Is Diversification?

Maximizing returns is the goal behind diversification. The saying, “don’t put all your eggs in one basket” is essentially an appeal for diversification. From the finance perspective, it is the process of mixing various asset classes within an investment portfolio. 

An asset class is a group of investments that have similar characteristics and are subject to the same laws & regulations. The risk profile attached to assets in the same class fall in similar ranges. Typically, you should only invest based on your risk appetite. That means before you invest, ask yourself- “how much risk can I afford to take on this asset”? This is why you should research the risk profile for assets you invest in. Some asset classes are Shares, Bonds, Commodities, Properties, and Cash.

How Will Investing in Real Estate Diversify Your Portfolio and Yielding ROI?[1]

Real estate historically has strong returns, making it a valuable choice for diversification. Unlike stocks, real estate has longevity which means that it matures over time. You can always expect its value to appreciate. Real estate also falls in the low-risk asset class which encourages consistent and sustainable returns over a longer period. Basically, your real estate investment can provide for others after you. The advantage is that depending on your risk appetite, you can mix aggressive and low-risk assets in your portfolio. It creates a baseline that will buffer impact and enable more returns. Real estate is also popular for its ability to generate passive income. It will get you cash flow for your retirement years.

Another benefit of investing in real estate is being able to build equity. Equity is an asset that is part of your net worth. Real estate can also be a good hedge against inflation and gives you leverage to acquire more property.

How to Use a Mix of Real Estate Assets to Diversify Your Portfolio

Experts recommend a 60/40 split when diversifying portfolios, allocating 60% of capital to stocks and 40% to fixed-income investments such as bonds. Real estate bonds are fixed-income investments or loans, backed by real property. Some other options to invest in real estate are private equity funds, publicly-traded REITs (Real Estate Investment Trusts), and DIY by purchasing directly from other real estate platforms.

As an independent investor doing it yourself, selecting the right piece of real estate to invest in is a vital part of the process. When choosing, you need to do thorough due diligence. If you use a real estate platform, consider the structure of service, the actual value of properties on offer, and process management expertise. We recommend using one that has both local and international appeal. That way, those in the diaspora can invest in properties. A proven track record is a good standard to rely on.

BuyletLive.com is an excellent reference for a real estate marketplace that fulfills these conditions. Using a seamless process, users can purchase properties. Agents’ posts are advertised through Buyletlive’s paid effort, addressing potential local & international customers. This helps agents gather more leads and users connect faster to properties for sale. The properties posted are thoroughly verified to ensure that their current state keeps up with maximum standards. There is also dedicated customer service available to handhold a user through the entire process and manage every inquiry.

Want to see for yourself? Check today’s properties here.

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