High Time To Add Stability To Your Investment Portfolio In The Age Of Frequent Equity Market Crashes
Now that the stock market crash has made a big, crushing impact on your portfolio, what’s Plan B?
Since the beginning of the year, the US stock market has been free falling. Now, Russia’s escalating conflict with Ukraine is exacerbating the market’s woes. So, what are investors to do? Sell, buy, or hold? Consider diversifying and altering your investment strategy. To what, you might ask? The real estate market. Particularly noteworthy is fractional ownership. It is a low-risk investment option with almost no volatility.
When you think of investing and creating wealth, do you immediately think of the stock market? Aren’t we all guilty of it? After all, the stock market has historically been one of the most important generators of long-term wealth, with compounded returns averaging 10% per year over the last century. If you immediately think of only the stock market for investing, you are missing out. Aside from stocks, there are excellent strategies for diversifying your portfolio through wise investments. So, why put all your eggs in one basket?
The stock market is fickle and unpredictable as the weather. The financial markets’ volatility got highlighted when retail investors lost money during the pandemic’s arrival in 2020, and now with the Russia-Ukraine War. It is simply impossible to predict the stock market (and foolish). When faced with uncertainty, real estate is a less volatile investment. Real estate investing was also less risky when the economy was struggling to recover from the Covid-19 outbreak. It was a strategy used by investors looking for more secure and wealth-building assets in the market. Real estate returns are also much easier to forecast. You have a lot more say over how the story ends.
However, a common misconception about real estate investing is that you need a fat bank account to get started. In reality, developing a portfolio begins with a few thousand—or even a few hundred—dollars. Assetmonk, for example, offers a ticket size of $13,000 (INR 10 lakhs). It is a WealthTech Platform that provides asset-backed CRE fractional investment opportunities in Hyderabad, Chennai, and Bangalore with IRRs ranging from 14 to 21%. Real estate has traditionally been a haven for the wealthy. However, this is no longer the case. An aspiring Joe does not need a large sum of money to invest in real estate. The advent of modern investment strategies such as fractional ownership has enabled anyone to invest in real estate with a comparatively smaller budget. Fractional ownership of the commercial real estate, which provides stability and excellent rental returns, has come to the fore and gained popularity.
How is the Russia-Ukraine war affecting the US stock market?
The S&P 500, which often serves as a proxy for the US stock market, crossed a significant threshold since the beginning of the current world scenario. On 21 February, the S&P 500 fell 1.01 percent to 4,304.76. That wasn’t much of a setback, but it was a significant step forward. It resulted in a 10.3 percent drop in the stock market from its most recent peak on 3 January. On 23 February, the index fell another 1.84 percent, bringing its year-to-date losses to 11.9 percent.
Wall Street reports the S&P 500 is in a correction because its losses since 3 January have exceeded 10%. The 10% definition is entirely arbitrary and the source of many arguments. But one thing is sure: a correction is not a good thing. It’s an early warning indicator that tells you the market isn’t heading in the right direction. A 10% decline isn’t necessarily outrageous in and of itself. But if the market continues to fall, the next thing you know, you’re down 20%, and everyone agrees you’re in a bear market and possibly facing a recession.
What makes the market decline troubling is that an escalating geopolitical conflict in Eastern Europe has now gotten added to the stock market’s long list of problems.
Why should you invest in commercial real estate?
The value of the property always rises. Real estate investments necessitate an initial investment which is typically more than the initial capital needed for the stock market but yields enormous returns without the risk of volatility.
Investing in real estate has several advantages over stocks. It produces consistent cash flow, appreciates in line with inflation, provides a higher return due to positive leverage, and allows for equity development through debt reduction. Many investment alternatives, such as commercial real estate, have a low correlation with the stock market and can protect your portfolio from swings in the broader economy. In contrast to other volatile investment products, CRE is a stable and physical asset class. Real estate has gotten chosen by investors as a haven for their spare cash to achieve stable returns that at the very least outperform inflation. Many people, however, are perplexed about how much money to invest and what options are available within their budget.
Stock investing is complicated and can be very intimidating. It is also extremely difficult to outperform the market. CRE investments, on the other hand, are not difficult to make with the help of real estate platforms. Assetmonk, for example, is a reliable real estate platform that can assist you in selecting stable and high-quality properties. It also ensures a smooth process of property selection and a hassle-free experience for all investors. So, how can you invest in real estate for stability and high returns when you have a tight budget? Via Fractional ownership makes the investment affordable. Assetmonk curates investment opportunities in strategic locations for maximum micro-market advantage, based on individual financial objectives like capital appreciation and monthly passive income. Assets selected are then thoroughly screened for all legal and financial compliance through Assetmonk’s 80-step due diligence process. There’s also another major advantage. All the investment opportunities on Assetmonk are asset-backed. This means your investment amount is safe even if an unforeseen circumstance arises.
Fractional ownership is a relatively new concept in India and an established and successful concept in the west. Here’s a simple explanation – a potluck is a gathering where each guest or group contributes a unique, often homemade, dish of food to share. Similarly, fractional ownership is the passive ownership of high-value real estate property by allowing like-minded people to form a group and own the asset in pieces as fractional owners. In addition, investors can divide the revenue associated with this asset in proportion to their investment.
Through this concept, investors can diversify their portfolios by owning a portion of assets such as commercial office spaces, warehouses, labs, parking lots, and industrial floors. An aspiring Joe can own commercial property as per his budget. As a result, the monopoly of HNIs in commercial real estate investing gets challenged.
But what happens after the investment? Those who have already invested in real estate would know that one of the biggest perils of this market is the burden of asset management. Well, if you invest via a trusted platform like Assetmonk, be assured that all you have to do is see your returns land in your bank account. Right from the start of the investment process, which is narrowing down on an opportunity, Assetmonk guides you throughout the journey. The platform allows investors to track their investment developments on a dashboard which keeps all the processes 100% transparent. You can check your property-related documents, monthly cash flow statements, and get milestone updates on your investment at your fingertips. Now that’s the best of both worlds, high returns with no volatility and convenience.
Why should you invest in fractional ownership of real estate?
Fractional ownership broadens the range of property investment options, and almost every property is now accessible to everyone, just as any investor can invest in any company stock, regardless of the total size of the issue. The majority of players have a minimum ticket size of US$33,000 (INR 25 Lakhs) or more. Assetmonk, for example, allows smaller ticket sizes starting at US$13,200 (INR10 lakhs) and earns rental returns ranging from 8% to 10% per year.
Fractional ownership necessitates a lower initial investment. Investors can spread their investible corpus across multiple properties and create a well-diversified portfolio of different property assets because they are not required to invest in any property in bulk. Property assets offer various benefits. But, a well-diversified portfolio can get created based on the investor’s specific needs and investment outlook.
Many more investors can now invest in real estate thanks to fractional ownership. Many of these properties will get leased for extra periods and with consistent tenants. A commercial property’s rental lease typically lasts three years, but it can get extended. Tenants in Grade A properties are large multinational corporations, banks, or information technology firms with large budgets; such tenants do not default on rent but pay on time. The portion of their fractional portfolio invested in rent-generating assets generates a consistent, long-term income stream. This investment, done over time, can go a long way toward providing investors with enough stable income to become financially independent.
Commercial real estate is a hard asset, and its returns do not fluctuate with the market, making it a safe and stable investment. Furthermore, the investment in fractional ownership is not locked in, and investors can exit whenever they want, according to experts. The most difficult aspect of property investing is not just investing and managing the asset. It is also about getting out.
Exiting high-value assets can be difficult and time-consuming. Selling anything at a profit is much easier in smaller quantities. In larger amounts, the same markup may be tough to achieve. Fractional ownership platforms like Assetmonk offer fractional sale opportunities and exit support. Fractional ownership of commercial property ensures an increasing rate of return in terms of both consistent rental yield and capital appreciation. Over the last five years, commercial property investment in India has provided a 16 percent CAGR. Aside from the increase in capital value, you can expect a 15% increase in rental returns every three years if you invest with reputable tech-enabled real estate investment platforms like Assetmonk. It is built into the rental agreement to protect against future inflation, ensuring that your investment remains stable over time.
Commercial real estate fractional ownership can help you diversify and stabilize your wealth outside of the stock market. Understanding and investing in the stock market remains critical. Diversifying your assets, on the other hand, is the best way to ensure the long-term profitability of your portfolio, as well as to develop retirement savings and other goals. Visit Assetmonk to learn more about investing in commercial real estate and start a conversation with our asset advisors.