Investing in the stock market is one of the most common ways to build wealth, but if you want to diversify your portfolio like a pro, look no further than real estate. Expand your horizons from just investing in the stock market like most investors tend to, and explore what single-family residential properties might do for you.
Here at Arrived, we’re focused on making it simple to have a diversified portfolio and to become a residential real estate investor. With our platform, buying pieces of rental properties is just as easy as buying shares of stocks.
There are many benefits that come with investing in residential housing or even just owning your own home. You can either purchase property that you can then rent or renovate and resell. The benefits of doing so are significant, provided you understand what work is involved, your specific investment goals, and whether any particular real estate investment, management style, or asset type is right for you.
There are many types of portfolio diversification, but one of the most beneficial and easiest ways to diversify is to invest in real estate. Let’s dive into diversification – what it means, how to diversify your investments, and how you can even diversify your real estate investments further!
What Is Diversification and How Is It Beneficial?
In the simplest terms, diversification is not putting all your eggs in one basket. This means spreading your money out in different markets, across different asset types, and with various investment strategies. You don’t want all your investing power in one stock or even in one sector of exchange-traded funds. Your overall investment portfolio can and should eventually contain investments in businesses, stocks, funds, real estate (commercial and residential), and even alternative assets like art or antiques. Basically, don’t go all-in on any one thing.
Take the most successful entrepreneurs for example; They rarely put all of their money and time into one business but spread it over multiple businesses, joint ventures, or passive income avenues. Entrepreneurs do not need to worry if one branch of their business goes under or they lose one stream of passive income. There are others readily available to them. This is a great example of diversification for business purposes.
There are some significant benefits to having a diverse investment portfolio. When you “spread the wealth” as an investor, you spread risk between multiple types of investments. If one investment does poorly, it’s offset by the performance of other uncorrelated investments. If your stocks drop, but you have other investments across different asset classes, you won’t feel it as badly. By diversifying into real estate, you are creating less risk for your overall portfolio and bolstering your financial future.
Diversification also ensures your journey toward wealth won’t be so volatile. You’ll avoid the roller coaster experience many investors without a diverse portfolio feel as their money in a single asset class steeply rises and falls daily.
Since everyone is so intrigued and interested in cryptocurrency right now, let’s take the idea of Bitcoin. It has a very volatile history. Some days, it skyrockets in value. Then, the next day the value drops by 30%. I don’t know about you, but my heart and emotional wellbeing can’t handle those extreme, unpredictable swings from one hour to the next.
I’d rather a smooth road trip than a freaky roller coaster ride, wouldn’t you?
Why Should You Diversify Your Portfolio with Real Estate Investments?
One of the best parts about real estate investment as a personal investment is that prices are independent of the activity on Wall Street. That is why using real estate to diversify your portfolio can lower your overall risk. While the stock market might decline in a month, the real estate market might continue to see increasing prices. This helps reduce the risk in an investors portfolio.
Another reason to use real estate to help diversify your portfolio is that home prices aren’t as volatile as the stock market. When you search for real estate investments, you are going to come across median prices or prices that are common in certain areas or neighborhoods. While some neighborhoods or rental properties may exhibit more risk, their prices will not change drastically next weekend or even next month.
The real estate market is an excellent hedge against inflation. Property values often tend to stay on an upward curve over time because the population is ever-increasing and people always need place to live. If you’re hesitant because you remember The Great Recession of 2008, let me reassure you that residential home values were back above their ‘07 value in less than 10 years – proving to regain value much faster and with more stable growth than the stock market.
Real estate investing provides you the opportunity for recurring income without any additional time or effort on your part. This helps you keep in stride and probably even exceed inflation simply due to appreciation.
If the aim is a diversified overall portfolio, individual investors should buy shares in multiple properties, and in multiple markets. This is like double-diversification – you diversify into real estate and also diversify across multiple properties across the US. By doing so, you reduce your risk profile significantly, especially if there’s an issue with any singular property.
Within the investment world, diversification across asset classes, geographical markets, and asset types allows you to protect against any downside, without losing much upside potential.
Why Diversify with Arrived?
There are two ways to diversify with Arrived. Both are extremely easy and beneficial to new and experienced investors.
The first way you can diversify with Arrived is to invest in real estate if you do not already have any real estate present in your portfolio. We have a very simple process that includes a team of experts to make the investment process go smoothly. You can invest anywhere from $100 to $20,000 in any home or homes listed on our site and start calling yourself a real estate investor today.
Another way you can diversify with Arrived is to invest across multiple properties and markets. Consider the difference of how a home in Detroit, MI may perform in comparison to a home in San Francisco, CA. Each housing market has its own cycles. So, rather than attempting to predict each market’s cycle, you have the ease and opportunity to diversify across many markets. We have many properties available located in various cities, rural and urban, across the country. This allows you to easily find multiple, beautiful homes and spread your investment capital across the US instead of in just one or two rental properties.
Arrived makes it easy to invest in residential real estate without becoming a landlord or having to manage repairs or tenants on your property. You’ll see we have the steps laid out easily for you right here on our website. We do all the heavy lifting, coordinating, paperwork, negotiating, repairs, tenant management, and acquisitions. You make the money.
How to Start Diversifying with Residential Real Estate?
Residential real estate can be an important part of any investment portfolio, and Arrived makes it easier than ever to get started! With a low minimum investment and a simple process for funding your account and building your real estate investment portfolio, anyone can begin setting themselves up for financial success.
We’ve purposely made it really EASY to become a real estate investor and begin diversifying your investment portfolio. Plus you can see the properties in which you’re investing, select the location, home value price range, rental status, monthly rent, and even explore details like square footage or the number of bedrooms – a huge step up in transparency from most REITs!
Start diversifying your portfolio right now by buying your first rental property. With Arrived, the WHOLE process can take you only 4 stress-free minutes. Start building wealth, earning dividends (passive income), and investing in residential real estate today. Got 4 minutes?