Real estate has long been a part of the world’s most effective and profitable investment portfolios, but those new to the space may still wonder “how does real estate impact wealth management?” Real estate can be robust insulation against market forces that cause other asset classes to fluctuate, but it can also be a significant risk for those that may need additional guidance before jumping in.
How Does Real Estate Impact Wealth Management?
There are many ways in which real estate investment potentially impacts your overall wealth management plans. Below are four of the most common benefits or advantages that investors can see, though there are many more depending on your investment strategy and risk tolerance.
It Acclimates You To A Non-Correlated Asset Class
Real estate is often one of the few non-correlated assets or investments. This means that real estate valuation isn’t based on the NASDAQ or the NYSE, and even if the market undergoes a significant correction, the real estate market will operate independently.
Real Estate Lets You Make Your Portfolio More Stable & Resilient
In times of excessive economic turbulence, having an asset that resists large movements in valuation can slow or even offset the losses that other asset classes would impose on your portfolio.
It Can Create Significant Income That Is Not Dependant On The Stock Market
The stock market can see tremendous gains and losses daily, and while the real estate market will see moves and changes, they will be of a much smaller magnitude. They will also be decoupled from the market movements and will be dependent on separate market factors.
Real Estate Can Significantly Insulate Your Portfolio From Risk
While other asset classes can see significant and costly changes to their cash value, historically real estate has been one of the markets that do not experience such drastic moves in overall valuation. When present in the right proportions, adding real estate to your investments can mitigate some of the risk taken on by other assets.
How Does Real Estate Impact Wealth Management: Why Is It Such A Stable Asset Class?
One of the reasons that real estate is known as an incredibly stable asset class is also one of the frequently-cited drawbacks of investing in it in the first place, namely its low liquidity. With most other investments, stocks, bonds, and other marketable securities, you can exchange them to the market and become liquid in only a few days in most cases.
This doesn’t apply to real estate, where a single transaction can take weeks or even months to complete, based on the complexity of the sale. Investors in real estate shouldn’t plan on becoming liquid in the next year or two, the most successful real estate investors generally plan to hold for a minimum of 5 years or more.
Real Estate Can Be A Great Hedge Against Inflation
With inflation rates reaching a 40-year high, there’s never been a better time to diversify into asset classes that can withstand those changes. Real estate, historically, has been able to weather inflation with incredible resilience. In many cases, when inflation increases and interest rates rise, the housing and real estate market sees very little movement.
How Does Real Estate Impact Wealth Management: Talk To An Advisor Today
Real estate investment is incredibly wide and diverse, and even getting started in it can make a new investor’s head spin. There are a lot of options for investing, and without deep analysis and some professional guidance, your money could be exposed to unnecessary risk. If you’re interested in how real estate can impact your wealth management strategy, speak to an advisor today, and let the experts at Prevail lay out a robust plan for adding real estate to your portfolio.