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Real Estate Funds – Safer Than Investing in Stocks?

 

Building wealth is a tough thing to do in today’s economy. While things have picked up, we’re still not back to pre-recession rates. What’s an investor to do? Should he or she sink yet more money into the stock market? Actually, that might not be the right thing to do at this point. Stocks always carry a considerable amount of risk, and there’s a lot of speculation that the level is just going to increase. Consider the fact that in mid-2016, billionaire investor Warren Buffet dumped a huge percentage of US stocks from his portfolio and replaced them with gold. Should everyday investors follow his lead? Actually, while divesting yourself of some stocks might be wise, real estate funds might offer the lower levels of risk that you deserve.

What’s a Real Estate Fund?

Before we go too much further, let’s consider what a real estate fund actually is. Real estate can definitely be directly invested in through the purchase of a home, a rental property or a vacation home. Many people choose to go this route. However, that carries almost the same amount of risk as investing in the stock market. If your property values should drop (and anyone who survived the Great Recession knows just how far they can plummet overnight), then your wealth drops.

A real estate fund is real estate investing, but on a different level completely. Essentially, a real estate fund is a “professionally managed portfolio of diversified real estate holdings,” according to Investopedia. What does that mean in English? Simply put, you’re able to invest your money into a wide range of different property types. As any investor should know, diversification is the best protection against risk and devaluation. With a real estate fund, you’ll be able to put your money into:

  • Commercial properties
  • Industrial properties
  • Rental properties
  • Limited residential properties

Why Can a Real Estate Fund Be Less Risky?

So, why could putting your money into a real estate fund be a less risky proposition than playing the stock market? It’s really all about the diversification offered combined with professional management and the ability to put your money into property types that would be unavailable to you as a private buyer. Simply put, while you might be able to afford individual shares of a company on the stock market, you probably don’t have the money to buy into commercial property that’s making income. With a real estate fund, you can.

Real estate funds also work similar to other investments, and less like actual homeownership. For instance, if you buy a home, you’ll build equity, but you have to get a loan from a bank to tap into that equity, and then you’re faced with the prospect of paying it back. With a real estate fund, you can actually earn a dividend as a shareholder in the fund. In exchange for your investment money, you earn an income from the fund. You also gain a great deal of protection because you’re only one of many investors in the fund.

With a real estate fund, you’re able to take advantage of investment opportunities that would not be available to you otherwise – commercial properties, high-end residential options, rental properties and many others can not only help you build a more secure future, but help to provide an income for you right now.

In the End

When everything is said and done, real estate funds can be less risky than playing the stock market. However, you have to choose the right fund for your needs. They’re definitely not all the same, and you’ll need to do due diligence to ensure that you’re putting your money into the right fund. It’s also important to consider how transparent each transaction is, and the requirements for investors in terms of the minimum investment amount needed to get started. A fund that offers flexibility in terms of investment duration will also  help ensure that you’re always in control of your financial future and can make smart, informed decisions when the time is right for you.

 

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