What % of portfolio is real estate?

Question

I was talking to my friend earlier today. I can either buy 1 or 2 properties with my cashout refi money. I'm concerned that if I get 2 properties, I'll be too overweight on real estate. It'd be like 80+% of my total investment portfolio.

I was wondering what other people are doing.

Thanks

Account Closed · Answer

Currently, I hold mostly stocks, so I am looking to make a purchase in real estate. While I have seen pretty significant returns in the past two years, mostly due to good timing, stocks have a greater standard deviation, fewer tax incentives, an inability to use leverage, no renters paying off your mortgage. As a result, I could see both the argument for a real-estate heavy portfolio for these reasons, or you could argue that the benefits of diversification in your portfolio create less idiosyncratic risk, which is the risk associated with an individual asset type or class or company, industry, or size in the case of stocks. However, a diversified portfolio does not get the highest returns; it mitigates the idiosyncratic risk. The market risk of these investments is always there. Given that real estate tends to experience more stability than other classes and the other reasons I previously listed against stocks, I think that real estate is probably your best bet. Listen to BP Podcast #500 with Robert Kiyosaki too. Best of luck!