EDUCATION
The pandemic has proven this when many businesses had to shut down due to economic instability in South Africa . It has proven and left its mark even in the property sector where the markets continued to favour buyers and not sellers , reflecting low returns on investments for property sellers and other investors in the real estate business .
According to Ashburton Investments , today ’ s global investment climate of prolonged uncertainty calls for a shift beyond the traditional understanding of “ diversification ” towards allocation of capital across more alternative and varying sources of return .
This means changing the name of the game , making use of digital solutions among many other sources of diversification to transform and boost your returns . At this point , the best way of looking at your investments , is by diversifying your portfolios and broadening the spectra of your wealth .
Portfolio Diversification Common rationale behind diversifying your investment portfolio , to get smarter and savvier as an investor , is that a portfolio constituting of different kinds of assets will , on average , yield higher long-term returns and lower the risk of any individual holding or security .
A diversified portfolio contains a mix of distinct asset types and investment vehicles in an attempt at limiting exposure to any single asset or risk .
CEO and Founder of Wealth Migrate , Scott Picken has been following a US investor who has been emphasising the importance of portfolio diversification and says investors should let go of traditional methods of diversifying their portfolio .
“ It is critically important for people to diversify . In the current times of Covid 19 , the number one thing that you should be doing , is diversifying your portfolio across countries , currencies , assets , and even partners ,” Picken says .
Diversifying your portfolio should not be limited to just one country , nor should it be limited to one industry . To diversify means to make bigger , diverse and / or varied , so you can invest across industries in a bid to secure your wealth and make impressive returns .
“ If you want to be a global citizen / investor , you have to spread your wealth across the world . Your wealth should also be proportional to the GDP of the countries in which you want to invest .
" South Africa ’ s Gross Domestic Product is 1 % of the global economy and based on that , if an investor is from abroad , their investments in South Africa should be 1 % just for the safety of their wealth .
“ Portfolio diversification is not a South African thing , nor is it for South African investors , it happens around the world . If you had all your money tied up in American property back in 2008 , when some cities crashed at about 40 to 45 %, a large portion of your wealth must have been lost therein . It is for this reason that I urge you to diversify and spread your money to keep it safe in various jurisdictions ,” Picken adds .
How ? There are many ways in which you can
SA Real Estate Investor Magazine MAY 2021 13