A downturn in the stock market can have a major impact on your portfolio. One way to help mitigate this impact is to diversify, especially by investing in real estate.
Diversification is about ensuring that all your financial eggs aren’t in one basket. While this concept is simple enough, many investors fail to implement it sufficiently. An investor may assume a portfolio invested largely in stocks is diversified, since it includes stocks of different market caps, geographic locations, and sectors. While this portfolio is more diverse than one invested in only a handful of stocks, it fails to account for diversification across asset classes.
One of the best ways to diversify your portfolio and protect it from the impact of a downturn is to invest in various asset classes, especially real estate. As an asset class, real estate is far less correlated to the ups and downs of the stock market, which makes it a vital investment in a downturn.