If I put my money in the S&P 500, should I even bother with real estate investing?

Yesou often hear that it’s important to build a fun and diverse investment mix. And invest in S&P500 index is a great way to do this.

The S&P 500 includes the 500 largest publicly traded companies by market capitalization. And it is generally considered a measure of the broader market situation.

When people say things like “the stock market crashed today” they are often referring to the performance of the S&P 500 index. So if you load your portfolio with S&P 500 index funds, that’s is a solid, hands-off strategy that could make you very rich over time.

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But even if you’re heavily invested in stocks, it could still be beneficial to add real estate to your portfolio. You’ll benefit from even more diversification, which could help you accumulate more wealth and protect you during periods of volatility.

The benefits of getting into real estate

When the general economy collapses, stock and real estate values ​​can follow. But that doesn’t always happen. In fact, the stock market is more than likely to experience its fair share of volatility as real estate values ​​hold steady.

This is precisely what is happening today. While equities are down across the board thanks to the turmoil of late April/early May, real estate values ​​are still strong. So right now, if you were an investor in both the S&P 500 and real estate, you would likely see losses in one portfolio but steady growth in the other.

Additionally, if you own an income property that generates steady rental income, that income can be used to offset losses in your portfolio when the S&P 500 crashes. It’s also money you can use to buy S&P 500 index fund stocks when they’re heavily discounted, paving the way for handsome profits down the line.

Of course, some people don’t want to take the risk of owning properties, despite the added portfolio diversification it provides. But in this case, you could add REITs (real estate investment trusts) to your portfolio instead.

The value of REIT shares can go up and down based on the performance of the broader market, but that doesn’t always happen. And one of the benefits of owning REITs is that they tend to pay generous dividends. So even if your stock portfolio plummets, your dividend income could help offset those losses.

Remember that companies (including REITs) that have a strong history of paying dividends tend to do so even when their stock prices are falling. It buys you some protection.

In addition, REITs are mandatory distribute at least 90% of their taxable income to shareholders in the form of dividends. If you own REITs, you can generally expect stable and predictable income, regardless of the performance of the market as a whole.

Do not hesitate to real estate

Putting money in the S&P 500 is a smart move, but so is investing in real estate. And there’s no reason you can’t combine both strategies for a winning portfolio.

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