Many of the most successful investors, along with financial experts, have suggested that the key to profitable investing is diversification – meaning spreading your capital across multiple investment ventures, all working alongside each other at any given time.
This ‘wealth safe-guarding’ approach is taken by investors who wish to reduce the risk to their capital, demonstrating the fact that even the most experienced investors cannot always predict the future, and they do not always know which of their assets will perform better or deliver the highest returns.
There are four main asset classes including cash, bonds, shares and property. Each asset class has its own advantages and risks, which we will explore below before we look at ways to diversify a property portfolio…
This is the most liquid of the assets and creates the benchmark with which to assess all other asset classes. Cash investments can include savings and current account balances, savings bonds, premium bonds and other NS&I products, Cash ISAs and any cash held at home.
Whilst cash provides a safe haven for funds when markets elsewhere may be volatile, interest rate returns are low and cash is not protected against inflation. Cash in authorised UK banks or building societies is protected by the Financial Services Compensation Scheme up to £85,000.
Also known as fixed-interest stocks or securities, bonds are essentially a loan to a company or government when they want to raise funds from investors. This includes Gilts (Government bonds), overseas bonds, local authority bonds and corporate bonds.
Bonds are a low to medium risk investment where you have relative certainty about your returns, however traded prices can be volatile and buying power can still be eroded over time if inflation is higher than the interest rate paid on the bond.
Shares are also known as equities and allow you to own a portion of a company. Shares are liquid assets and can be a profitable long-term investment. However, share prices can be volatile, crashes do happen and the company’s performance is out of your control with the possibility of the board reducing or even stopping the issuing of dividend returns.
With a strong record of delivering financial returns above and beyond the rate of inflation, property is a popular asset class. There are a number of ways to invest in property, including the purchase of a building or real estate or through partnering with a property investment company on a development project or buy-to-let venture.
Different investment strategies provide investors with various means of return, including capital gains, interest on investments or regular monthly rental income. However, property investments do not provide liquidity as capital is often tied up until a property is sold.
One of the biggest advantages of investing in property is that it will always hold some intrinsic value; whilst the property market can have its ups and downs, unlike shares, the value of a property will never be zero.
Diversifying your property portfolio
Just as financial experts recommend a diverse investment portfolio as a way to reduce risk and increase gain, the same rule of diversification can be applied to a property portfolio.
At Hubb Property Group, we provide investors with the chance to diversify their assets in two ways – by offering different asset types in the form of development funding and buy-to-let opportunities, and by offering investment in properties in different geographical locations.
Development funding – This model investors a shorter term investment option where finance is used to develop schemes through to completion. Returns are generated by buying real estate at a discount and adding value through development.
Buy-to-Let – This model allows investors to benefit from regular rental income and potential capital growth without the hassle of buy-to-let management. Investors also have the opportunity to diversity a lump sum across many properties to further expand their property portfolio.
By investing in properties in different geographical locations, investors can spread and reduce risk by gaining exposure to multiple markets and offsetting cyclical downturns with cyclical upturns.
And finally, every property investment opportunity offered by Hubb Property Group is ring-fenced, ensuring that investments are kept completely independent of each other and all investments are secured with a debenture.
If you would like to discuss your personal investment objectives and/or find out more about our current opportunities, we’d love to hear from you. Call us today on +44 (0)117 4220122 or email email@example.com