Real Estate: Diversify Your Investment Portfolio in 2022

Savings are crucial. Everyone needs to save money as they go through life. Even as little as five percent savings from a bi-monthly paycheck can make a difference in a person’s overall fiscal health in the long term. While savings are crucial, they are only half the battle when it comes to creating a nest egg. The other half is where to stash your funds. Many savings vehicles exist including real estate, government-sponsored bonds and proven, long-standing stocks from widely successful companies.

It’s important for all savers to know the pluses and potential drawbacks of the available investments on the market today. It’s also crucial for all investors to make sure their investments are diversified. Doing so can protect the person from loss of capital.

Should one part of their portfolio not do well in a given time, another area of the market is likely to flourish and provide the investor with the growth they need to meet their overall plans. Having many different kinds of real estate investments is ideal. Varying forms of real estate can offer a firm fiscal foundation from which it is possible to truly build wealth over time. Knowing the best place you can place your hard-fought funds can help you achieve financial freedom.

Single Family Homes

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Many people choose to buy at least one home. Buying a home has a great many advantages. People can deduct the interest they pay on the mortgage on their primary home. They can also invest in this home over time and add to the home’s overall value. Paying down the mortgage can build equity over time.

At the same time, there are some drawbacks. A person may need to sell quickly only to find it a buyer’s market. This can lead to losses. A home may also require a lot of money to keep it in good shape. You can also see a more in-depth guide on this from The Kay-Grant Group.

Index Funds

Index funds are mutual funds that aim to mimic the overall performance of a given market such as the S&P 500. This is a good choice for those who are looking for funds for retirement. They are stable investments that are likely to continue to remain stable over the long term.

At the same time, they can lag behind the overall performance of the market. This can lead to a reduction in the growth of your nest egg. While index funds can play a role in your finances, it is best to consider other options as well for great long term growth.

Individual Company Stocks

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Individual company stocks have been a form of investing for decades. They are widely available. For the investor just starting out, this can be a good choice to help them get started and get on the road to growth. Over time, the investment can begin to pay off as a company grows. While this can lead to higher yields, individual stocks are also quite risky. A company may fail leading to the loss of capital. It’s best to keep this one to only one part of your overall investment portfolio.

Blue Chip Stocks

There are many different types of stocks. One of the most popular is what are known as blue-chip stocks. Blue-chip stocks are pieces of a company with a long-standing history and great financial success. These are a good addition to your portfolio. Many pay dividends on a quarterly basis.

This can be a good source of income for those who need to supplement income in retirement. The drawbacks are that such stocks may be expensive to purchase. They may also not see much increase in overall value when measured against many other forms of investment over the long term.

Your 401k

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Investing at work can be very useful. The 401k was specifically designed for workers. Workers put in a small sum directly into an account. The money then grows over the course of the worker’s life. When they are ready to retire, they can get access to the money. Also, they can take life insurance, a lot of people use them. If you want to learn more about it, click here.

This is good for workers who enjoy reduced income in retirement as this income is taxed at that point. At the same time, putting in the money now can make it hard to get it directly out for other purposes such as a down payment on a home or for college fees.

Roth IRA

The Roth IRA is similar to the 401k in that it is based on the worker’s paying money into this form of personal investment over time. Where it differs is that the person pays taxes on the funds in advance. What this means is that the person can later withdraw the money during retirement without the need to pay taxes as the taxes have been paid in advance.

This can mean a bigger bite in the person’s overall income when young, making it a harder form of savings. For those who can afford it, the IRA is a good choice that enables them to save money in retirement.

Bonds

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Bonds are loans to an entity. In return for the loan, the company or government agency pays back the bondholder in the form of interest. This is a good choice for those who are looking for a safe investment that is unlikely to lose value.

If the company does not do well, the bond holder has the first claim on the company’s assets. While useful, the bond market may only provide a very minor interest in return for capital. This can make them lose vast ground to inflation over time.

Treasury Bills

Treasury bills, also known as T-Bills, are a loan to the government. Unlike other forms of bonds, the government backs them up. This makes them a very safe choice for any investor as the government has not defaulted on such loans since the founding of the nation.

While they are very safe, they may also pay very scant interest. Someone young has the opportunity to use time to grow their portfolio. Other investments can be a better fit for their overall life risk profile.

Multi Family Homes

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Another type of real estate investment is a home that has more than one tenant. This is known as a multi-family home. A multiple family home can be a great source of investment income. Buying a home and choosing to rent it out to several tenants can offer the chance to build up equity and pay the costs of ownership quickly.

At the same time, it can take a lot of time and effort to keep the property in good working order. This is a good choice largely for those with the experience to make it work without the need to call in costly specialists.

Commercial Real Estate

Commercial real estate has become increasingly popular in recent years. Many companies allow outside investors to participate in the funding of their ventures in bringing a place for businesses to grow. Commercial real estate can offer the investor the opportunity to participate in creating commerce by letting them invest in places like shopping malls and offices meant for doctors, lawyers and other professionals.

Commercial real estate can pay off in areas that are poised for growth leading to a tremendous opportunity to earn high returns. While this can be a good form of investing, it can be risky. This is a good option for those who want to add some risk and growth to their overall financial picture.