Real estate investing is an often overlooked, but potentially very attractive, means of diversifying and smoothing out a portfolio.
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Adding real estate to your investment portfolio is a great idea.
Because it offers diversification, real estate makes a good addition to traditional stock and bond style portfolios.
This is especially true because real estate is it’s own asset class, can offer generous yields during periods of depressed economic activity, and can appreciate when the economy is strong.
Real estate also combines aspects of stocks and bonds that tend to work in opposite directions in most economic conditions.
For this reason and others, financial advisors tend to consider real estate as an alternative investment on the level of commodities.
Real estate investing can not only help diversify a portfolio but can also smooth out its rough patches.
The reason real estate investing is often overlooked, however, is that most people already have great exposure to the asset class by way of their own homes.
Since a home is most people’s largest asset, finding exposure to real estate isn’t typically a priority.
“AS LONG AS HOUSEHOLD FORMATION CONTINUES, REAL ESTATE WILL CONTINUE TO BE A VIABLE ASSET CLASS.”
Since the real estate bubble and the subsequent technology bubble, real estate investing has recently been considered a less attractive option by some. Despite this, people should look at it in a long-term sense.
As long as household formation continues, real estate will continue to be a viable asset class.
What’s more is that some stock portfolios have allocation to mortgage insurers or real estate investment trusts which tend to pay healthy dividends.
Because both of these sectors are tied to real estate, they thrive when prices are rising.
In a long-term sense, the health of the real estate market is determined by demographic and economic trends. These trends remain favorable and make real estate an attractive option for investors seeking non-correlated returns.
If you have any other questions or would like more information feel free to give me a call or send me an email. I look forward to hearing from you soon.