Global financial markets are subject to volatility during times of turmoil, and that has been uniquely true for the last few years. A global pandemic, political strife, and ongoing international conflicts have had a significant impact on markets and on investors. Preparing for future crises by strategically planning and diversifying your portfolio can help you continue to build wealth, even in uncertain times. Fortunately, there are some steps you can take to diversify and crisis-proof your investments, including using real estate diversification.
While the stock market has seen significant changes in recent years due to inflation, interest rates, and financial uncertainty, the economic impact on multifamily real estate has been somewhat different. An ongoing housing shortage and changes in demographics across major city centers has kept demand for rental housing high, providing a potential hedge against inflation.
Real estate market resilience has been due to the factors listed above, as well as the shift from in-office work to remote work, which has provided workers with the freedom to move to smaller secondary and tertiary markets. Rental income stability from multifamily real estate properties can provide investors with a consistent source of cash flow, even when stocks are not showing similar consistent performance. You don’t have to have millions of dollars to invest in multifamily real estate though, so it’s easier than you think to crisis-proof your portfolio. REITs and single-asset offerings, such as those from DiversyFund, let you add real estate to your portfolio without the need to purchase publicly traded stocks or to invest in a whole property on your own.
Investments designed to be held for the long-term may be ideal for those looking to crisis-proof their portfolios. Real estate diversification may not be as liquid as diversifying with stocks and bonds, but these investments let you build wealth over time without the volatility of traditional markets. Whether you purchase an apartment building to provide you with monthly income you can rely on for years to come or you invest in a REIT with the goal of improving and then selling a property, real estate gives you a unique way to diversify your portfolio.
Of course, there are other long-term options that carry less risk than stock market investments. Certificates of Deposit (CDs) provide a guaranteed rate of return provided you hold on to the investment for the length of the term. CD ladders can be helpful for individuals looking to add stability to their portfolios and create dependable income over an extended period of time. CDs do come with trade-offs, such as illiquidity for the length of the investment term and potentially lower rates of return. Treasury bonds can also provide dependable rates of return and can be used to offset more risky investments you currently hold in your portfolio. While not FDIC-insured, they are backed by the full faith and credit of the government, providing some added peace of mind.
If you are concerned about market volatility and diversifying your portfolio, assessing your risk tolerance might be a good idea. You’ll want to determine how much risk you’re comfortable with as well as how solid your financial situation is before you take on new investments. This means ensuring you have enough emergency funds to cover unexpected expenses without having to touch your current investments. Balancing your long-term goals with the liquidity of future investments may also be key. If you feel you might need access to your money sooner rather than later, having a mix of long-term and short-term investments might help you feel more comfortable and secure in your strategy. You don’t have to make this assessment on your own. Speaking to a financial advisor is a good first step before making any decisions, including on real estate diversification, and your advisor can help you perform a risk assessment and give you a better overall look at your current finances.
A financial advisor can be helpful in crisis-proofing your portfolio, but it’s always a good idea to stay on top of current financial news and world events. Having a better understanding of how the markets work and how world events can move markets can help inform your decisions and your discussions with your advisor. For example, following the housing shortage can provide insights into the benefits of investing in multifamily real estate. There are apps you can download to your phone or tablet that let you keep an eye on stock markets and financial news so you can stay informed of current events. Other apps let you track your investments, providing insight into how the news is impacting your portfolio. DiversyFund’s easy-to-use app lets you monitor your real estate investment account so you always know where you stand.
World events can have a serious impact on the world of finance, but you don’t have to be subject to the whims of the markets or a victim of inflation. By diversifying your portfolio, you can hedge against instability and uncertainty while continuing to work towards your financial goals. Multifamily real estate can be an essential part of your wealth-building journey, and you can learn more about how DiversyFund can help using real estate diversification by clicking here.