In the world of the silver screen, investing is often depicted as a thrilling roller coaster. Here in the real world – rather more gray than silver – investing is generally a long game. An exercise in avoiding runaway trains, rather than leaping gleefully on them, mitigating excessive risk, instead of looking for it. And the heart of this strategy is diversification.
By spreading investment across cash, bonds, stocks, real estate and derivatives, investors avoid putting too many proverbial eggs into one basket. It’s not the stuff of Oscar-winning performance, but it might just be your happy ever after. Here’s why.
Diversification is viewed as one of the key levers investors have to reduce and mitigate risk. By spreading your investments across different assets and products, you have the best chance of successfully riding the natural highs and lows of investing. The broader your base, the more stable your funds are likely to be over time, meaning you have the best chance to achieve steady growth, with minimal exposure to market swings.
On a large scale, this might mean spreading your investment across different asset classes, each of which might react differently to whatever the external environment throws at them. You can aim for holdings across cash, bonds, stocks, real estate and derivatives. Each asset type is likely to track slightly differently to the others, and the variety brings a degree of stability to your investments.
Fintech Opens Property as an Asset Class
It is an appealing asset class not least because of its intrinsic ‘bricks and mortar’ value. The worth of property is easily understood, unlike the infinitely complex task of assessing the value of company stock picks. While companies can fall victim to any number of internal and unseen issues, leaving the investor learning only too late that there are storm clouds gathering over his investments, the fortunes of the property market are the stuff of headlines.
Everyone, it seems, is an expert in property. But tapping into the potential gains from real estate has been impossible for most investors – until, that is, fintech platforms started to throw open the doors. Leveraging the growth in property value has traditionally been an option only for professional investors and well advised, high net worth individuals. The barrier to entry was simply too high, so despite the gains to be had in property, funding a purchase has been off limits to smaller investors and those just starting out.
Diversifying within a Diversified Portfolio
Fintech platforms typically allow investors to start investing with only a small initial stake. Many projects available for investors at EstateGuru, for example, start with a minimum commitment of €50. Over time, this means that even modest investors can place funds in a variety of real estate backed projects, making it possible to diversify even within an asset class. In the unlikely event that any individual project should fail, each investor is exposed to only a small proportion of the risk.
Choosing to invest in projects through a platform like Estate Guru gives another advantage, in that projects might be across different countries. Investors therefore can spread their funds across different geographic locations. With markets locally impacted by political and social change, seeking stability in geographic spread is a smart move.
There is no way to remove absolutely all risk involved in investing – but diversification is a tried and tested way to mitigate the risks while holding the benefits of long-term investing. Whether you’re a seasoned pro, or a beginner, you can learn more about investing in projects with EstateGuru, as part of a diversified portfolio, here. We won’t offer you Hollywood cliffhangers, or action film adrenaline. But we do our best to give every investor the red carpet welcome they deserve.