When it comes to your financial portfolio, the secret to mitigate risk and maximize profit is diversification.
The strategy of diversification involves more than just investing in a wide variety of stocks and mutual funds spread amongst different brands and industries. To truly diversify, it means to invest in alternate assets that aren't tied to the same stock market trends.
Many investors can remember the financial and economic woes of 2008. The market took a significant dive from where it had been in previous years and even if you had diversified by investing in stocks across multiple industries, your portfolio still took a hit. However, there were some investors who were able to weather through this down period. Those investors understood the true meaning of diversification.
What Diversification Means to the Smart Investor
Despite the many opinions of the “talking head” experts on all the major financial news networks, no one can say with 100% certainty what the stock market will do in the future. Your portfolio should not only be diversified across a variety of stocks, but also among several kinds of alternate assets like real estate.
The Balanced Portfolio
Most successful investors have a balanced portfolio. As to be expected, “balanced” varies from person to person but it generally involves comprising your portfolio of stocks, bonds, commodities, cash, and other assets like real estate. Although there are many schools of thought on how you should allocate your portfolio, how you do this is up to you, but adding an asset class that isn’t tied to the stock market can help you stay profitable if/when the stock market has another major downturn.
Are You Missing a Piece of Your Investment Portfolio?
By choosing to add real estate to your portfolio you'll be diversifying away from the stock market and the volatility associated with it. Real estate, especially when viewed through the eyes of a typical bank, is a far more stable investment than single stocks or mutual funds.
- Cash Flow: Generate monthly income from tenants
- Appreciation: Build wealth through appreciation in your investment property
- Leverage: Use other people’s money to help you maximize returns
- Hedge Against Inflation: Protect your capital against inflation by owning real estate
- Tangible Asset: Real estate is a physical asset that you own
Successful investing is really about giving time to let your assets grow and diversifying to mitigate risk. It’s now just as easy to invest in single family rentals as it is to invest in stocks. Want to learn more about diversifying into real estate? Download the FREE White Paper.