Real Estate Investing Helps Mitigate Market Volatility
Any investor who hears the word “volatility” in reference to the market is concerned. It’s a word that frequently evokes unsettling feelings. That said, if your portfolio is appropriately structured, market volatility may not be as much of a worry. Although it is well recognized that a solid portfolio begins with good investments, it can be challenging to determine what exactly qualifies as a “good” investment when the market is turbulent.
WHAT IS VOLATILITY?
Volatility is defined as a propensity for rapid and unpredictable change. In terms of the stock market, it typically refers to the frequency and intensity of price changes, whether they be upward or downward. The bigger the shifts and the more often the price swings, the more volatile the market is said to be. It appears that Canadians will have to adjust to more ambiguity as “everyday volatility” appears to be the new norm, according to Stephen Poloz, former governor of the Bank of Canada.
NAVIGATING Market Volatility
You don’t only have to wait for the market to turn around in your favor. There are steps you may do to protect yourself from volatility. Your portfolio is under your control even if the market is not. Private real estate can provide your portfolio with actual diversification and possibly superior long-term risk-adjusted returns because it is often unaffected by stock market changes.
Real estate has the reputation of being recession-proof, which is understandable. Purchasing alternative assets, such as Real Estate Mutual Fund Trusts (MFTs), can assist knowledgeable investors to combat market instability and increasing their returns. mitigate volatility.
According to Forbes, they also mentioned that REITs add important diversification to your portfolio as they primarily generate dividend income for their investors and reliable risk-adjusted returns. Not only have Private Canadian Apartments1 performed better than Canadian Preferred Shares, but they’ve also been significantly less volatile with a return of 9.2% between 2003-2021 compared to 4.1% for Canadian Preferred Shares1a. During the COVID-19 crash in 2020, Private Canadian Apartments actually increased by 2% while Canadian Preferred Shares fell by 35%.2
*Data based on Sharpe Ratio. NOTE: the higher the Sharpe Ratio, the better the investment’s historical risk-adjusted performance has been.
GET BACK SOME CONTROL
No one likes to feel like they don’t have any control especially when it comes to their hard-earned money. Diversifying your portfolio to include alternative investments like private MFTs can provide a much-needed counterweight to the fluctuations in other sectors of the market.
At Pyramine, we believe that diversifying your portfolio with private real estate investments offers an attractive opportunity with the stability of yield, inflation protection, and growth potential. This provides investors with regular income distributions as well as asset value appreciation. In a volatile market, having an investment that performs consistently and offers stability can make all the difference.
Using your money wisely is the best way to ensure your financial future and ride out market volatility.
You’re in control. Show it by making sound decisions about your portfolio.
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