I don’t buy digital real estate – I do this instead
The world around us is becoming increasingly digital. Data centers have seen a noticeable increase in demand because people are continuously working and communicating digitally, as well as buying things online rather than in-store.
The whole digital trend has expanded to encompass the world of real estate investing. And these days, a lot of people are pouring money into the metaverse.
When you go this route, you are not gaining ownership of physical property. Rather, you are acquiring ownership of digital land which may or may not increase in value over time.
Digital real estate is a concept that could really take off in the years to come – or it could crash and burn. To me, it’s terribly risky despite its recent popularity. And so rather than putting my money into digital real estate, I plan to stick with an investment that has served me well for many years already.
I stick to REITs
I’m a big believer in maintaining a diverse mix of investments in my portfolio and like the idea of diversifying into real estate. But I admit that I have a limited tolerance for risk, which is why I haven’t really tried not only digital real estate, but also crypto, which is another speculative investment.
My risk tolerance is such that I’m also not comfortable owning physical real estate. Buying an income property means running the risk of it sitting vacant for months, or tenants trashing it, or major expenses hitting the pike that I’ll have to cover.
This is why the real estate part of my investment part is in charge of REITs (real estate investment trusts). REITs are companies that make money by owning and operating different types of properties. What I like about REITs is that I get exposure to real estate while limiting my risk.
But to be clear, REITs offer many advantages. First, your REIT shares can go up in value over time, especially if you’re willing to hold them for many years.
In addition, REITs are required to pay out 90% of their taxable income as dividends to shareholders. This means that since buying REITs, I have enjoyed a steady stream of dividend income which I choose to reinvest to grow my portfolio even further.
Of course, I made it a point to choose my REITs wisely. And to that end, I’ve actually jumped on the digital bandwagon to some degree by investing in data center REITs. But while I’m comfortable going that route, the metaverse in all its glory just isn’t something I can engage with. And so I’m staying away – at least for now.
Stick to your strategy
My investment strategy is based on buying stocks of quality companies in a range of industries and holding those investments for many years, while reinvesting any dividend payments that come to me. My strategy is also based on investing in companies and concepts that I fully understand and see making money.
Digital real estate just doesn’t fall into that bucket for me, nor does crypto. I’ve come to terms with the fact that speculative investing just isn’t my thing. If you feel the same, digital real estate may not be the right choice for you.
If your risk appetite is healthier, of course, go ahead – invest in the metaverse and see where it takes you. But if you want to take a less risky approach to real estate investing, it might be worth looking to REITs instead.