It’s So Important to Diversify Your Real Estate Portfolio Story

It’s So Important to Diversify Your Real Estate Portfolio

When investing in stocks, I diversify by owning funds that own thousands of stocks. An investment in Vanguard’s Total Stock Market Fund gets me ownership in over 3,500 publicly traded U.S. companies.

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To diversify further, I own shares in Vanguard’s Total International Stock Fund. That adds over 7,300 foreign stocks for a total of nearly 11,000 stocks between the two funds.

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However, when investing in real estate, there is no three fund portfolio. Diversification can still be accomplished in a number of ways.

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It’s So Important to Diversify Your Real Estate Portfolio

Doctors Like Certainty and Steadiness

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Not only that, but we’re used to acting in the best interest of patients by first using all available evidence and data and then carefully considering the risk-benefit ratio of each move. First, do no harm.

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This mindset is why I think that diversification, and the resulting decrease in volatility, is something that suits us well. While huge returns are attractive, it’s more important for most of us to preserve our capital, and avoid huge losses.

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People like to talk about the real estate market as a whole, but in reality, real estate is a very local economy.

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Different parts of the country, different parts of the state–heck, even different parts of a city–behave differently with changes in the economy. Every market has a submarket.

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It’s So Important to Diversify Your Real Estate Portfolio

When investing in stocks, I diversify by owning funds that own thousands of stocks. An investment in Vanguard’s Total Stock Market Fund gets me ownership in over 3,500 publicly traded U.S. companies.

To diversify further, I own shares in Vanguard’s Total International Stock Fund. That adds over 7,300 foreign stocks for a total of nearly 11,000 stocks between the two funds.

However, when investing in real estate, there is no three fund portfolio. Diversification can still be accomplished in a number of ways.

It’s So Important to Diversify Your Real Estate Portfolio

Doctors Like Certainty and Steadiness

Not only that, but we’re used to acting in the best interest of patients by first using all available evidence and data and then carefully considering the risk-benefit ratio of each move. First, do no harm.

This mindset is why I think that diversification, and the resulting decrease in volatility, is something that suits us well. While huge returns are attractive, it’s more important for most of us to preserve our capital, and avoid huge losses.

People like to talk about the real estate market as a whole, but in reality, real estate is a very local economy.

Geographic Diversification

Different parts of the country, different parts of the state–heck, even different parts of a city–behave differently with changes in the economy. Every market has a submarket.

SWIPE UP NOW TO READ MORE

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