Keen to upgrade your investment portfolio by exploring the different investment opportunities? Regardless of how you spend your money, no investment is totally risk-free. However, this doesn’t mean you can’t mitigate these risks to help protect your investment and income as much as possible. One way to protect the income you make from real estate is to create a more diversified investment portfolio. Below, the expert team of property professionals at The Mistoria Group explains how to diversify a investment portfolio of properties and identify the various benefits of adopting this approach.
What is a diversified investment portfolio?
In relation to real estate, a diversified investment portfolio refers to spreading out your investment across a range of different types of investment property sectors and opportunities. The idea is to lower your risk of losing a lot of money by not investing everything into just one type of asset.
For example, a wide property investor may decide to fund both commercial spaces as well as residential properties. As a result, if one property or sector starts to perform poorly, your losses will be covered by the gains from the other sector or property.
Crucially, an effective diversified investment portfolio includes investments that share very little correlation with one another, so if one is negatively impacted by an event, the other is unlikely to be affected in the same way.
What are the benefits of diversification in real estate?
The biggest advantage of diversification in property investment is the higher likelihood of an increased return coupled with a reduced risk. While it’s true that no investment is ever risk-free, this diversification is key to lowering the risk of one single event having a substantial impact on your financial position.
You’ll also have more flexibility and freedom to invest in areas that offer the best return on investment (ROI). For example, houses of multiple occupation (HMOs) and commercial properties are well-known for providing better yields, in general, than typical Buy-to-Let (BTL) opportunities.
If you channel all your money into just BTL properties, not only do you put yourself at greater risk of losing it all, but you may also be missing out on more lucrative real estate opportunities. Failing to effectively diversify your investment portfolio can therefore be detrimental to your income.
What is the easiest way to diversify your portfolio?
Unsure where to start when it comes to learning how to diversify a portfolio of properties? As touched on above, the easiest way to diversify your property investment portfolio is to identify different types of assets that either have low or negative correlations with each other. Instead of investing in both student accommodation and standard BTL opportunities, however, it’s well worth looking further afield.
If you’re serious about diversifying your property portfolio, we recommend exploring property stock exchanges and trading platforms like EFTs (exchange-traded funds), REITs (Real Estate Investment Trusts), and mutual funds.
For example, if you were to invest some of your money into a Real Estate Investment Trust (REIT) you’re more likely to benefit from high dividends, fewer risks, and a more stable income. For those struggling to create a diversified investment portfolio, it’s important to seek the right help from experienced property professionals.
Require support with diversifying your Investment portfolio?
Searching for professional advice from an experienced property investment team? At The Mistoria Group, we’ve built up an invaluable amount of expertise, experience, and local market knowledge to help our clients make the right decisions when it comes to diversifying their property portfolio.
We can support you with creating a diversified investment portfolio that will help you to protect your assets and take advantage of a wider range of opportunities. Specialising in property in the North West of England, you can grow your investment portfolio into sought-after areas like Bolton, Liverpool, and Salford.
To find out more about the various property investment opportunities available through The Mistoria Group, simply contact our expert team today. You can either give us a call today on 0800 500 3015, email us at firstname.lastname@example.org, or reach out using our online contact form.
Once we receive your enquiry, you can rest assured that one of our experienced property investment experts will be in touch soon to learn more about your investment portfolio goals.