Most people understand diversification in the stock market and properly invest their portfolio across many different types of stocks and bonds, but true diversification includes investing into more asset classes than just stocks and bonds.
The Chief Investment Officer of the Yale Endowment advises individual investors to follow the “20% rule” allocating 20% of their portfolio to real estate among five other asset classes. The masterminds at Yale have been practicing this 20% rule for years and have consistently brought great returns through their endowment.
Traditionally, the stock market returns an average of 8-10% per year. The correct real estate offerings, like the ones offered at Paradyme Funding, have brought an average projected return of 19.6% to investors. Investing in real estate not only diversifies your overall portfolio to mitigate your overall risk, but it also brings a possibility of much higher returns.
Paradyme Funding lets you add private market real estate to your portfolio just as easy as buying stocks!
What is Diversification?
Diversification is a portfolio strategy that reduces risk by allocating investments into several different asset classes, especially ones uncorrelated to “traditional” assets like stocks and bonds. The stock market can be volatile at times and it is smart to protect yourself by investing in places outside the stock market so you can protect and enhance your returns.
Why Invest Part of your Portfolio into Real Estate?
The inclusion of real estate in your portfolio can serve to mitigate potential losses from stocks as well as add additional return potential. Macro or micro-environmental factors can cause certain companies to drop in value which negatively affects your investment portfolio. Alternative assets, such as real estate, may be less likely to be negatively affected by the same issues that result in a decline in the stock value of airline and rental car companies. In the end, it is very smart to spread your investment money across multiple types of assets, not just multiple types of stocks.
Below is an example of how investing into Real Estate can bring down the volatility of your portfolio while also increasing your returns.
Ready to add that 20% to your portfolio? Check out our Current Offerings today!