There are several ways to diversify and protect your portfolio; one of the most common and best known are the Investment Funds offered by banks and financial entities. A more familiar option is the shares that trade on the stock market. Others are the Real Estate Investment Trusts and, finally, the Security Tokens. However, we must explore before considering any of these investments. What are their advantages and disadvantages?
Investment Funds
These funds bring together groups of people intending to invest in financial assets such as shares (variable income), bonds (fixed income) or physical assets such as real estate. Each investment’s evolution depends on the performance of the assets during the agreed-upon period.
This possibility allows small investors to access professionally managed investment portfolios, and after having generated profitability, the value of the valued assets is divided by the number of participants. However, there are some limitations for investors who opt for this alternative, such as minimum periods of permanence, very high minimum investment amounts and high commissions for portfolio management.
REITs
Real Estate Investment Trusts (REITs) are another route for real estate investing. Investment companies report income from property rentals and generate passive income. There are two types of REITs, public and private.
- Public REITs are publicly traded so that anyone can buy fractional shares of such funds. However, their returns are often lower than the market and must be tied to a broker or advisor.
- On the other hand, private funds that are not listed on the stock market usually have a higher minimum income amount and are usually linked to a minimum investment time since there are no secondary markets where these types of assets are traded.
An advantage of this type of real estate portfolio is that they are managed by a third party and can be considered a passive income investment. However, its main disadvantages are high entry amounts and commission and brokerage costs.
Shares
Another example of investment in the financial market is the purchase of shares. These are securities on the assets of a company. Its possession represents a right of ownership and controls a certain percentage of the total company. It is classified as an equity investment since it depends on business results and has no fixed return. Usually, the shares are transferable without any restriction, that is, freely.
Stocks have a much more volatile behavior. This risk is due to the fact that they are directly affected by government decisions, inflation, company decisions, and changes in the environment.
Security tokens
The sale of real estate tokens is one of the latest opportunities in real estate. This coin is governed by a smart contract that gives its owner the same rights and obligations as a conventional share but backed by a physical asset.
When buying, an investor exchanges money for tokens representing fractions of an asset, such as real estate. They are fungible financial instruments, that is, divisible and negotiable with an associated monetary value. The offering of these tokens runs on the blockchain, which is active 24/7, unlike the stock market. This allows greater exposure to the offer, reducing the time of buying and selling this asset.
The real estate sector is one of the most stable in the world and is usually affected by external agents in a very slight and delayed way. Therefore, the opportunity to invest in real estate and the blockchain is an added value that reduces time and costs, being a very attractive investment for those who want to invest from lower amounts. For example, in the case of BRET Real Estate Tokenization, you can invest in properties for just $100.
Depending on the needs of each investor, the risk profile of their portfolio and the expected return period, the best option can be chosen. However, without a doubt, the purchase of security tokens should be considered a more stable and efficient alternative.
In the following video, we show you how to start your investment process in the first tokenized unit in Miami.