Portfolio diversification is an essential risk protector in the investment world.
If you invest in both stocks and bonds, for example, you already are practicing diversification.But there’s a lot more to balancing your risks and returns than these two types of assets.
A truly diverse portfolio has a variety of investments to protect you from market volatility.
Depending on your age, interests, and goals, the ways you choose to balance your risks will look different. However, there are some assets that are always worth a spot in your portfolio.
Let’s dig into what portfolio diversification means, why it’s important, and how investing in real estate is essential to a healthy portfolio.
What is portfolio diversification?
When you diversify your portfolio, you invest your money in different asset classes to balance the risks and rewards.
If you only invest in one stock, for example, and the market plummets, you could lose your entire investment.
A diversified portfolio might include:
- Stocks from various industries and countries
- Bonds
- Commodities (oil, grain, electricity, etc.)
- Gold
- Real estate
Diversifying doesn’t guarantee against loss, but it provides you a greater level of protection against the market’s ups and downs.
Balancing your investments
Stocks represent the highest yields with the greatest risk, while bonds are known as a balance that provides steady yields with less risk. Investors generally build their portfolios around these assets.
One key component of a balanced portfolio is real estate. Investing in real estate, when done right, can provide the high yields of a higher risk investment while offering greater security to investors.
Real estate investments also will work together with some market “threats,” such as inflation. When inflation occurs, real estate investments typically benefit because rent and property prices rise, too.
Why you should diversify your portfolio
Diversifying your portfolio is essential at any point during your investment path, but it looks different at various stages.
While you need to consider when you are going to need the money, you also must consistently weigh how much risk you’re comfortable with. These two factors work together to help you build a portfolio that works for you.
For example, if you are 20 years away from retiring, you usually can afford to take more risks than you can when retirement is five years away.
But this is where diversification shines: No matter how much risk you’re willing to take, you still need a balance so you don’t lose it all.
Why real estate secured notes create a perfect balance
Whether you’re a more conservative investor or enjoy the push and pull of high-risk, high-yield investments, you can appreciate the flexibility and consistency of high-yielding real estate secured notes.
If you’re a fan of digging into the work as a landlord and want to purchase properties yourself, this is also a great way to diversify. But even if you’re investing in real properties, you should balance this investment with real estate secured notes.
When you invest in these notes, you take over the role of mortgage lender and begin collecting the borrower’s principal and interest rate payments.
Investors enjoy the freedom to choose the property type, which includes:
- Single family or multifamily
- Commercial or industrial
- Owner-occupied and non-owner-occupied consumer or business purpose
Depending on where you are investing, you may not have this range of options. And you certainly aren’t guaranteed the same level of security with each financial institution.
When you are choosing the financial group you’d like to invest with, you must proceed with caution.
How to diversify your portfolio with real estate
The key to finding quality real estate secured loans actually starts with private money lending.
Private lending has become a staple of the financial services industry, offering profitable deals to those who otherwise can’t access these funds from traditional institutions.
This once largely untapped market is now flourishing thanks to private money lenders. But before you call the first lender you find, understand that not all are created the same.
Investing with Marquee Capital Fund 1
Marquee Funding Group is a tight-knit team of experienced hard money lending experts. They offer qualified investors the opportunity to participate in Marquee Capital Fund 1, a mortgage fund containing quality real estate secured loans.
Investors can gain access to a wide range of high-yielding secured notes that are a result of well-underwritten private money loans. Loans are in both the consumer and commercial marketplace.
Marquee Funding Group is committed to protecting investors through several measures. Loans are screened and underwritten with an emphasis on yield preservation and principal.
Each aspect of the loan request depends on the following:
- Quality of collateral
- Borrower’s financials and ability to repay
- Verification of title
Marquee provides transparency to investors through the use of portfolio reporting tools. Our team wants to build relationships with our investors to develop mutual trust and a lifetime of quality deals.
We can promise a quality borrower base that, in turn, ensures you are investing in high quality, high-yielding secured notes with target returns of 8% to 9.5%.
Marquee also provides:
- Tax-advantaged strategies
- REIT status, which allows investors to deduct 20% of qualified REIT dividends from their income tax return
Qualified investors can get started with Marquee Capital Fund 1 today.
We look forward to helping you diversify your portfolio with added security and high yields.
Photo by Marvin Meyer on Unsplash
