In the world of personal finance, we often talk about having a diversified portfolio. You know, the pie chart with all the different colors. What we don’t often talk about is what exactly this means and how we can achieve true diversification. And spoiler alert, it’s not just about having a lot of different colors in a pie chart of basically the same thing.
Diversification happens when we truly invest in non-correlating assets…..or when we invest in “stuff” that doesn’t go up and down together in value during periods of market fluctuation. One way to have more diversification in your family wealth is to invest in real estate. This could be the house you live in, a second home, investment properties, commercial properties, and raw land just to name a few. History tells us real estate does not always move in the opposite direction as risk assets (stocks, bonds, mutual funds, etc) but it doesn’t always move in the same direction either. When we can have this type of balance in our family wealth, we are now one step closer to true diversification.
What else can we invest in to gain diversification you ask? Great question! Besides the traditional investments like stocks, bonds, mutual funds and real estate….there are often overlooked investment opportunities such as business ownership, lending opportunities, commodities, options strategies, digital assets and cash.
So if you are considering adding real estate to your overall portfolio please remember that like all investments, there is no such thing as a sure thing. A diversified portfolio does not assure a profit or protect against loss in a declining market. All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful.
Be smart with your money, be clear with your intentions and be positive with your mindset….probably the best diversification strategy around.
See you next month!
Kimberly Enders, CFP® CSW® 38700 Van Dyke Avenue Suite #125 Sterling Heights, MI 48312 (586) 554-7969
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