Diversifying with Real Estate and Stock Portfolio

7 Replies

I am under contract on my first investment property (owner occupied single family with ADU rental). I am planning to save for a year and try to buy another property.

Do you all only invest in real estate (stick to what works for you) or do you prefer to invest/diversify in stocks? 

I am thinking of doing 25/25/25/25 split for real estate equity, individual stocks, employer retirement account, and cash. What do you do?

Hey Nicholas! I think diversification is definitely a smart move. That being said, if you're just getting started in investing, I would focus on only one investment strategy at a time. At least until you have a solid foundation built up. You'll be able to accelerate your investment growth in a particular area if you hyper focus on it. That being said, it depends on you as an individual and what your goals are. I personally am striving for creating and growing passive income streams. I have a stock portfolio that I invest for primarily dividend income, but I'm focusing on real estate right now. I hope this helps, let me know if you have any questions!

Hi Nicholas,

As a contrasting thought, consider that "diversification" only makes sense if you are allocating your wealth into several good bets. Many of the money-greats have been adamantly against diversifying because they wanted to focus their efforts into one arena, or just a few strong channels. It doesn't make sense to take money out of one area only to put it into a less likely growth area (or one in which you have no competency in), simply for the sake of diversifying.

With that said, since we cannot know the future with certainty, we do have to decide how to allocate our funds and cash-flow. Putting a quarter into cash may be excessive, depending on how much you have to work with. Cash is great to have on hand, but remember that cash is always losing value when sitting in a bank or under a mattress (and this loss is accelerating). As for stocks, putting most into something near-certain (like a time-tested index fund) can be wise, using dollar-cost averaging is smart, and then betting on likely hyper-growth opportunities (e.g., buying oil companies when they crashed a year-and-a-half ago) can work for us. And consider putting a percentage into cryptos - sure, many coins may crash and many approaches are not time-tested, but also, there has never been such opportunities for life-changing gains as now exist in that space.

Our wealth is spread between real estate, cash, stocks/funds, crypto, and a little in physical metals. Oh, and books, tools, etc. Whatever directions you choose, keep learning and refining your own path.

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I think you should be diversifying inside of real estate and out. I hold the bulk of my cash in index funds and stocks and then build my real estate portfolio like an asset portfolio. I like to flip, I like to BRRRR, fix and hold no refi, I like Airbnb, I like self-storage, I like mixed use, commercial, wholetails. New investors with little time to play would be wise to mix in easier, low cash flow, options like turnkey over time, but not as a core.

I concentrate my efforts on RE because historically I have obtained by far the best return from RE (over 100% return annual).  However we have stock and North Dakota mineral rights.   I use some of the stock as holding area for my future RE purchases and have access to margin loans that are below Fannie/Freddie rates.   It gives me an advantage if I can  purchase all cash at rates less than 50% of hard money (some people do the same thing with life insurance or lower risk investment options). 

My current area I am researching are NFTs.   Do you know who always made money at the gold rush?   It was not the miners.  It was the merchants.  See the analogy? 

Good luck 

@Nicholas Chagnon I think this is a great question, I'm interested in further responses from the community.  I personally am not aiming for any kind of precise split, but I do invest in the stock market in addition to RE.  I have >50% of my net worth in RE at the moment, including my primary.

I would buy stock following the value investing strategy followed by the Warren Buffet etc.Real Estate has that benefit of control over the asset
SO i guess both would do, its just a question of weighting -95% real estate-5% stocks for example