Ensuring your investment portfolio can take a hit without collapsing is the best way to keep your wealth intact. But how do you do that? The short answer is diversification. Ensuring your portfolio covers multiple asset classes is the perfect way to secure your financial future.
Why should you choose an alternative asset class like real estate to diversify your portfolio? Well, here are four benefits of diversifying your investments with property.
Investing in assets like stocks or cryptocurrency might bring about substantial short-term yield, but in the same breath, it can lose its value just as quickly, as neither asset is tangible. Regardless of what happens to the property market, your investment is still a house, it’s still something that has its own inherent value.
Yes, the value of your property investment may rise and fall, but it will never be zero.
Asset classes like cash and equities are often affected by the same policy changes and economic headwinds, meaning that if one takes a hit, it’s likely the other will too.
Alternative investments like real estate are less affected by those changes, so if one of your equity investments starts to perform poorly, you have your property investments to fall back on.
Diversifying into property investment means you also benefit from two different income types: cashflow-focused returns and capital growth returns.
A cashflow-focused investment like cryptocurrency (Bitcoin) means more money in the bank today, it allows you to go out to a nice restaurant a couple of times a month without being too concerned about your budget. Capital growth investments like property allow you to buy a house for R800 000 now and sell it five years later for R1.2M.
Cashflow-focused returns mean you don’t have to worry about making ends meet, but capital growth returns mean your family is set for generations which is why having both maximises your wealth!
A great benefit of diversifying your portfolio is the timelines attached to those investments. A well-timed equity divestment can make enough cash available to buy a bigger long-term investment like property.
Selling the stocks you bought two years ago and using that income to put down a deposit on a R2M house is a great example of how excellent timing can make your money work for you.
A well-diversified investment portfolio might have a mix of some investments that are maturing or being divested soon, while other investments have years and years to run.
You now know the benefits of a well-diversified investment portfolio. So – if it suits your financial position and aligns with your financial goals – consider adding property to your mix of investments.
An estate like The Atlanta @ Amberfield City in Centurion offers various property types at affordable prices with above-average ROIs. If you don’t feel ready to take the leap with a four-bedroom house, consider a two-bedroom apartment or a three-bedroom house. Who knows, if you time it right, a few years from now, that four-bedroom house could be all yours.
