January 22, 2020

By: metronz

Invest in property they say, build a proper portfolio, and this can lead you to financial security. Sounds amazing doesn’t it? But how to get started, what is an investment property portfolio anyway?

According to the Corporate Finance Institute, an investment portfolio is: “a group of investments that an investor uses in order to earn a profit while making sure that capital or assets are preserved” This group may include:
  • Stocks - a portion or share of a company
  • Bonds – money given to the issuer as a loan
  • Alternative Investments - assets whose value can grow and multiply, such as gold, oil, and real estate
In conclusion a portfolio is a selection of investments. They need to be carefully selected to minimize risk. The CME Group highly recommends a diverse portfolio. This way your investments can benefit from the changes of the market.

Last year Forbes rated property investments as number 1 way to invest your money in non equity assets.

Barclay Palmer summarizes the main advantages for choosing property investment to diversify your investment portfolio.
  1. Competitive Risk-Adjusted Returns – investing in property is a relatively stable investment
  2. High Tangible Asset Value – since properties are materialistic investments, they rely less on integrity and competence of people
  3. Attractive and Stable Income Return – property investments usually have higher return compared to being relatively stable
  4. Portfolio Diversification – real estate investments tend to behave differently from bonds and stocks, therefore it can provide a higher return per unit of risk
  5. Inflation Hedging - As economies expand, the demand for real estate drives rents higher which makes property investment more rapidly pays out
However, be careful when you invest in property. It is mostly a long term investment. Unlike bonds and stocks that are basically as liquid as money, you cannot withdraw your house in seconds. It also requires a certain knowledge in the market to be able to choose the perfect property. Since it a high value investment, do not be shy to ask for professionals’ advice.

Bottom line, property investment is a great choice for you, if you would like to lower the risk of your investment portfolio, and you are not seeking for a liquid, rapidly changing, rather a long term stable investment.

This article retrieved information from: CME Group (2020): The Benefits of Portfolio Diversification, https://www.cmegroup.com/education/courses/understanding-the-benefits-of-futures/the-benefits-of-portfolio-diversification.html Corporate Finance Institute (2020): Investment Portfolio https://corporatefinanceinstitute.com/resources/knowledge/trading-investing/investment-portfolio/ (2020): Key Reasons to Invest in Real Estate https://www.investopedia.com/articles/mortgages-real-estate/11/key-reasons-invest-real-estate.asp