As you search for investments to diversify your portfolio, the question of volatility will cross your mind. Determining what investment types have a higher risk can change what you choose to invest in and how you earn your money. Volatility can change from investment to investment, and depending on what your goals are for your future wealth, you may want to consider options that can bring you a high return without the risk of losing money.
An investment that is both low risk and high return is real estate. Real estate investments offer lower volatility than other investments, such as stocks, but before investing, it is essential to understand why and how it could affect you and your future wealth. Stocks offer their own set of benefits and can be a great addition to any portfolio, but so can real estate. Evaluating the differences in volatility can help you make the right investment decision.
Real Estate Is a Longer-Term Investment
Unlike other forms of investment, real estate investments take upwards of years to get you your largest return. While you will gain a passive income from the asset, an investment such as this is meant to be held onto for years so that you get the most out of it. With real estate being a long-term investment, it is more likely to overcome any market volatility and come out of it stronger on the other side. The housing market might not change as drastically or quickly as the stock market, but holding the investment for multiple years will ensure that you have the opportunity to sell or get the most out of your return later on. By requiring you to hold it longer also ensures that you do not sell it in a moment of panic, such as a stock investment. This can make it a safer investment in the long run.
It Offers a Tangible Asset
Having a tangible asset can allow you to have complete control over it. You will find that while more houses can be built, there is only so much space, and, in the end, you own an asset that is scarce and sought by everyone. This can make it more valuable to others and yourself. An asset such as this can also be renovated, redesigned, and reconstructed to help increase the property’s value and increase the return you get back. With a tangible asset, you have the ability to see the value and watch it grow, creating a safer investment than a stock investment, where you have a less physical view of its future.
Real Estate Is a Non-Correlated Asset
Stock investments have the chance of changing values multiple times a day and at fast speeds, forcing investors to keep an eye on their investment and when to sell at the right time. A significant difference between stocks and real estate investment is their ability to change in short periods of time. A real estate investment will not change in value as drastically or quickly as a stock, and, in reality, any changes might be too small to see and won’t change your return. There is very little market correlation between the two assets.
Real Estate Is More Predictable
One factor that makes real estate less volatile is its predictability. Real estate does not rise or drop as quickly as a stock investment, and predicting when it is a good time to buy or sell is much easier to find. You can gain stronger confidence in your real estate investment as it is involved in a more stable market and is easier to watch for any fluctuations over the years. Unlike the stock market, you can see when low selling periods will arise, and you can prepare for them.
Get Larger Returns Over Time
Real estate is the answer if you are looking for an investment to bring you larger returns and an additional stable income. Real estate offers lower volatility as you can get the returns you are looking for without stressing about the stock market’s rises and falls. Real estate offers you a stable, steady, and less fluctuating market.
When comparing investment options, it is essential to understand what you are looking for and where you see your wealth in the years to come. If you have questions about investing in real estate, reach out to the team at Morton Capital.