How To Diversify Your Portfolio With Real Estate and Emerging Tech
If you’ve heard one piece of investing advice, it’s that you need to diversify your portfolio. It sounds good, but as you nod your head, you might wonder how exactly you can go further than the healthy mix of asset classes, sectors and even geographic regions you already have in place.
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However, every smart investor — whether you’ve been swimming in the sea of stocks for a while now or just started dipping your toe in — knows that you’ve got to regularly review your portfolio to determine when and how to change things up. Adding real estate investments, as well as companies that produce emerging technology, can provide new opportunities for growth while helping manage risk over time.
While these industries may be new to you, it’s easier to get started investing in them than you might think — especially if you follow a few simple tips.
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Real Estate Opens the Door to More Options
One of the core benefits of adding real estate to your portfolio is the fact that real estate doesn’t always trend with the stock market — meaning that even if there’s volatility on Wall Street, that doesn’t mean it’ll hit your investments on Main Street. In addition, property values generally tend to increase over time due to factors like inflation, demand and limited land supply.
You also enjoy great flexibility in how you approach real estate investing: You have the option of buying a property, or multiple properties, so you can rent them out to other people, either as long-term rentals or short-term vacation stays through platforms like Airbnb or Vrbo. Even if being a landlord seems overwhelming to you, you can outsource the day-to-day management to a property manager. If your rental income covers those costs, you could still walk away with a solid profit.
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That said, if you don’t want to take on the responsibilities of direct, hands-on property ownership — or don’t have the capital to do it — you might consider a real estate investment trust (REIT). A REIT is a publicly traded company that owns or finances income-producing real estate, such as shopping centers, apartment complexes or office buildings. You can buy shares in a REIT just like you would a stock through any brokerage account.
The perks of investing in a REIT? It’s highly liquid and requires a low minimum investment. It also pays dividends regularly, typically on a quarterly basis. That said, because REITs trade like stocks, you do have less control over the underlying assets and may experience market volatility.
Emerging Tech Brings Your Portfolio Into the Next Frontier
There’s a whole world of emerging technologies out there, from AI to blockchain to green energy, and they’re attractive investments not only because they reflect the direction of the future, but also because they allow you to put your money into areas that excite and inspire you.
If you’re excited about the potential of artificial intelligence, you can invest directly in AI-focused companies like Nvidia, Microsoft or other firms partnered with OpenAI. You can also explore AI-specific ETFs and mutual funds that provide broader exposure.
If blockchain or crypto sparks your interest, you can invest in cryptocurrencies directly or in blockchain-related stocks, such as Coinbase. There are also blockchain ETFs and other investment vehicles focused on building infrastructure, scalability and security in the decentralized ecosystem.
Environmentalists who want to invest in green energy have their pick of renewable energy stocks and green bonds, which finance eco-friendly initiatives. You can also consider ETFs and mutual funds centered around environmental, social and governance (ESG) criteria.
Find a Way To Balance These Assets
When you’re assembling your real estate portfolio, you can further diversify by property type — residential, commercial, industrial or even vacation rentals. Likewise, with emerging tech, spreading your investments across different sub-sectors like AI, biotech, clean energy and blockchain can help reduce risk while boosting potential returns.
To put it simply: Real estate can provide recurring income, through tenant rent or REIT dividends, while also helping to hedge against inflation. Emerging tech, on the other hand, may offer a little more sizzle in terms of growth potential, though it tends to be more volatile and may not produce consistent short-term cash flow.
As always, your best strategy is to regularly review your portfolio and make sure it aligns with your goals and risk tolerance. Diversification isn’t just about owning many different investments — it’s about owning the right mix to support your financial future.
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This article originally appeared on GOBankingRates.com: How To Diversify Your Portfolio With Real Estate and Emerging Tech