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Business News/ Brand Stories / Real estate: Essential component of a complete asset portfolio
BRAND POST

Real estate: Essential component of a complete asset portfolio

Real estate investments offer a unique combination of attractive risk-adjusted returns, income generation, capital appreciation, and diversification benefits. Unlike other asset classes, such as stocks and bonds, real estate is a tangible asset with intrinsic value

Mr Dharmesh Shah, CEO, Hero Realty Private Limited

Diversification is a fundamental principle of sound investing. By spreading investments across a range of asset classes, investors can reduce risk and improve their chances of achieving their financial goals. One asset class that is often overlooked but is crucial for a truly diversified portfolio is real estate.

A diversified portfolio helps your assets weather storms in the same way that a sturdy base helps a building stand firm no matter the weather. The dangers that can affect one asset or market may not affect another. When it comes to diversification strategies, not all are made equal. To properly diversify your portfolio, you need to consider options beyond the stock market and traditional security investments.

For instance, the purchase of equities across industries or indices may create the impression of diversification, but it is not likely to safeguard your holdings in a bear market. The economy and the stock market have close ties. This means that when one stock falls in value, it will all experience a proportional and equally devastating decline. A market meltdown frequently has a domino effect on other markets throughout the world. Yet, real estate is a physical possession, a tangible asset.

Real estate investments offer a unique combination of attractive risk-adjusted returns, income generation, capital appreciation, and diversification benefits. Unlike other asset classes, such as stocks and bonds, real estate is a tangible asset with intrinsic value. The value of real estate investments is driven by various factors, including location, demand, supply, and economic conditions. This can help protect investors from inflation, as property values tend to rise with the cost of living.

Furthermore, real estate is known to provide a steady stream of income through rent or leasing arrangements. This can be an excellent source of passive income for investors, providing regular cash flow that can be used to meet expenses, pay down debt, or reinvest in other assets.

Another key benefit of real estate investments is their diversification potential. Real estate tends to behave differently from other asset classes, such as stocks and bonds, which means that it can help reduce overall portfolio risk. This is because real estate values are driven by local factors such as supply and demand, rather than broader market movements.Moreover, real estate can be a hedge against economic volatility. In uncertain times, investors tend to flock to tangible assets such as real estate, gold, or commodities, seeking refuge from market volatility. As a result, real estate investments can help protect against market downturns, providing a stable store of value when other assets may be performing poorly.

Unlike other assets, real estate and real estate diversification pay dividends when the benefits are required most. Real estate investment yields are predictable and the sector has performed well from an asset-liability standpoint. On a long-term horizon, the risk of experiencing a significant real estate loss is extremely low and hence a sensible choice of investment.Real estate investment is also one of the most dependable means of achieving financial independence and generational wealth. A majority of the world's well-known billionaires, including Warren Buffet and Bill Gates, include real estate investments in their portfolios. Real estate investment is one of the most trustworthy investments due to its long-term and short-term rewards.

In conclusion, real estate has remained one of the most tried-and-true investment options due to continuity in demand. People will always prioritise housing because it is one of their essential requirements, along with food and health care, even in hard economic times. Real estate also provides some tax benefits, such as operating and owner expenses, depreciation, deferral of capital gains tax, property insurance, ongoing maintenance costs, and more. Compared to investing in other sorts of non-real estate assets, this lowers the overall cost. Finally, if you purchase rental real estate, you can continue to profit from it without making any active efforts as it frees up more time for personal pursuits or, if desired, other enterprises.

Disclaimer: This article is a paid publication and does not have journalistic/editorial involvement of Hindustan Times. Hindustan Times does not endorse/subscribe to the content(s) of the article/advertisement and/or view(s) expressed herein. Hindustan Times shall not in any manner, be responsible and/or liable in any manner whatsoever for all that is stated in the article and/or also with regard to the view(s), opinion(s), announcement(s), declaration(s), affirmation(s) etc., stated/featured in the same.

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