What Asset is Missing From Your Portfolio?

The rules of investing are ubiquitous and timeless: be wary of hype; know what you own; do your research; minimize your fees. But bizarrely, the most crucial rule of portfolio management is often the most overlooked: diversify.

EarlyShares is an online platform committed to helping investors diversify their portfolios, so we provide accredited investors with direct access to a variety of vetted investments. (Diversification is just one of our cornerstone investor benefits .)

But helping investors capitalize the types of high-potential opportunities we specialize in involves education. Why? Because most investors have only a limited understanding of asset allocation and portfolio diversification.

Why diversify?

Diversification is the concept of spreading your investments around so that your exposure to any one type of asset is limited. Diversifying reduces the volatility of your portfolio over time by balancing risk and reward.

If you know anything about diversification, you’ve probably heard a common ratio before: 70% stocks, 30% bonds. Financial services firms and portfolio managers often champion the 70-30 model (or a slight variation) as the ideal long-term asset allocation framework. But is it?

Every investor’s portfolio should be tailored align with his or her age, investment goals, and risk appetite. But – all those factors notwithstanding – the more diversified your portfolio, the lower your probability of earning negative returns.

By focusing only on stocks and bonds, the 70-30 model fails to include many asset types that can not only help you mitigate risk and volatility, but also help you earn returns. One asset class that has historically driven strong returns is commercial real estate – and now is the perfect time to become a ‘CRE’ investor.

Strong market

For decades, financial advisors have recommended that 5-20 percent of an investor’s portfolio be comprised of alternative assets that are not subject to the whims of the public market. Commercial real estate is one of those.

Real estate is a great asset class with little correlation to the stock market,” says Frank Armstrong, CEO of Investor Solutions, a registered investment advisor in Miami. “It can over time reduce portfolio risk and increase returns in a properly structured portfolio.

Additionally, real estate is riding the recent economic upswing. According to recent data compiled by the National Association of Realtors. the U.S. commercial real estate market is gaining momentum from strong, continued growth in business and consumer spending.

So if you’re interested in passive commercial real estate investing, how do you go about it? Traditionally, your options have been limited to two approaches – the “Country Club” model and the Real Estate Investment Trust (REIT) approach – that are inherently restrictive.

• The “Country Club” Model: Rely on your network for referrals.

It means… if you’re looking to learn about new investment opportunities, you better be well connected. You’re also likely to only find out about investment offerings for projects in your region

• The REIT Approach: Buy shares of a pool of properties.

  It means… you’re not in the driver’s seat. Since an REIT’s board members or trustees decide what properties the trust buys, sells, or finances, individual investors have no control over which projects they invest in.

Like other avenues for investing, these models work well for some investors and less well for others. If you like to be in the driver’s seat of your portfolio, these options are far from ideal, since they don’t give you direct access to (and control over) the opportunities you are introduced to.

New regulations are changing everything. Thanks to the implementation of Title II of the JOBS Act, these traditional routes are no longer investors’ only options for commercial real estate investing.

New opportunities

“Real estate crowdfunding” is a new approach to investing in commercial real estate. Under the Title II regulations for “general solicitation,” accredited investors can gain direct access to commercial real estate investments through online portals like EarlyShares. On our site, investors can easily find and fund real estate deals that would otherwise be inaccessible to them.

EarlyShares works exclusively with experienced real estate project partners with proven track records of strong investor returns. We employ a rigorous screening and due diligence process to curate only the most selective return-driven investment opportunities. This emphasis on diligence helps investors round out their portfolios with high-potential new assets from credible partners.

Plus, EarlyShares provide investors with all of the tools and resources needed to evaluate investment opportunities, conduct their own due diligence on the property or project, ask questions of the sponsor or developer, and complete their investment transactions. We make it simple through a seamless four-step investing process.

Through investments with an average investor rate of return of 10 percent or more, commercial real estate investments on EarlyShares are more than just mechanisms to reduce the volatility of your portfolio – they’re opportunities that generate fast, strong returns. Sign up now to get started.