Diversifying Your Investment Portfolio with Real Estate: Strategies for Success
Investors should look at their risk profile, perform due diligence or even go to the extent of seeking financial advice from an expert to decide which asset class would best suit their portfolio based on their investment goals.
With the introduction of 0% stockbroker commissions, user-friendly mobile applications, affordable smartphones, and a vast social media knowledge base, today’s retail investors are well-equipped to enter what was once a very intimidating world: the stock market. The COVID-19 pandemic has ignited a growing interest in passive income worldwide, resulting in a surge in the number of retail investors. Consequently, individuals who previously only invested in bank fixed deposits now have access to the stock market, cryptocurrency, mutual funds, SIPs, Real Estate Investment Trusts (REITs), and more.
Beginning in 2019, another avenue of investment opened up for retail investors: Real Estate. Historically, Real Estate was primarily accessible to high-net-worth individuals (HNIs) due to the massive financial commitment . The barriers to entering the real estate market were so high that retail investors were excluded for a significant period. However, today, with the growth of fractional real estate ownership platforms, individuals can invest in and own a portion of a real estate asset, benefiting from rental yields and property appreciation. These platforms offer opportunities to participate in both commercial and residential real estate ventures. While commercial fractional investments typically begin with an initial ticket size of Rs. 25 – 30 Lakhs, residential fractional real estate investments provide accessibility with an entry point as low as just Rs. 1 lakh.
With the rise in inflation post-pandemic, many investors are recognising the advantages of investing in real estate, such as hedging against inflation and low volatility. People have come to understand that although the stock market can provide better and faster returns, it is also highly volatile and easily influenced by geopolitical issues, global events, and inflation. Diversification of one’s investment portfolio can be a strategy to mitigate personal financial risk and reduce overall portfolio volatility. Fractional real estate ownership platforms offer investors an avenue to diversify their portfolios by investing in real estate and earning passive income.
Investors should look at their risk profile, perform due diligence or even go to the extent of seeking financial advice from an expert to decide which asset class would best suit their portfolio based on their investment goals. However, diversifying one’s portfolio by investing in different asset classes can help investors balance out market uncertainty and could be the secret ingredient to a healthy portfolio.
The author is founder, Claravest, a fractional real estate investment platform. Views are personal.