Diversify your property portfolio to reap long-term rewards

Whether you are looking at domestic property, office property, land or any other type of real estate investment, there are more than enough options out there. While many of us tend to stick with “what we know”, if you are looking at a long-term property portfolio it does pay to diversify. This is not as difficult as many people would have you believe and history shows us that it does lead to a more balanced return and better long-term gains.

Why diversify?

If you look at the property market you will see an array of property investors who have made significant amounts of money by focusing on one particular type of property. There is no doubt that some people do have a gut feeling for property investments but for every one investor making a fortune there are many who will have lost money.

In simple terms, if you pick the right market, at the right time and the right price then you can make a significant amount of money over perhaps a short, medium or long-term timespan. However, if you put all your eggs into one “asset basket” and it goes wrong, where does this leave your investments?

How to diversify

There are many ways in which you can diversify your portfolio and the most suitable for you will depend upon how much money you have to invest. If you have a relatively large amount of money and you can gain exposure to individual properties in specific sectors then it may be an option to buy actual property assets. For those who have perhaps a limited pool of funds available there are other options such as shared investments or perhaps the more popular, pooled investment vehicles such as investment trust, unit trusts and the like.

There is no excuse for a lack of diversity in your property portfolio, there are many ways and means of economically investing across a range of assets although at the end of the day it will come down to your risk profile. Are you willing to invest heavily in one particular area which you are “certain” will perform? Perhaps you are looking longer term and require a more balanced portfolio?

Taking professional financial advice

More and more people are now taking advice from professional financial advisers in relation to their overall investments as opposed to specific areas. The reality is that if you look at one particular area, perhaps ignoring other areas of your financial life, this does not give a clear picture and decisions can be made which may not benefit your overall portfolio/finances. There is obviously an array of tax considerations, economic investment vehicles and above all, something which many people seem to forget, the timescale of your investments.

Can you imagine, you pick the right market, you pick the right time and you are well positioned to benefit in the medium to long term. Then suddenly, something happens in your life and you require additional finances forcing you to sell your property assets sooner than you had planned. This is the nightmare scenario which many people face simply because they used funds which were not available on a long-term basis. Property transactions, and any other investment deals, should be entered into with a long-term timeframe in mind using funds which would not normally be required at short notice.