Lew Nonnenmocher, RE/MAX on the Coast 
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Real Estate Reports

How to Balance Your Portfolio


The advantages of a balanced portfolio should be self-evident - unfortunately for many they aren't. In fact, many investors either don't understand the concept and importance of a balanced portfolio, or if they do they have not put the concept into practice.

What do we mean by a balanced portfolio?
It's very simple - don't put all your eggs in one basket. If you have your eggs divided amongst a variety of baskets and something terrible happens in one or two of those baskets, then you still have eggs intact. If they were all in one basket, you'd have nothing left to carry on with. Seems simple enough.

So why doesn't everybody do it? That's an easy question with an easy answer. It's because of the agenda of our advisers. If you go to a banker for investment advice you are usually going to wind up with your money in a savings account, GIC or mutual fund. If you ask your insurance man you'll most likely wind up owning a lot of whole life insurance. If you ask a stockbroker in some cases you may wind up with whatever it is that he gets the highest commission from selling. In short, they are motivated to sell specific products, not necessarily to create an ideal portfolio for you.

You diversifying your portfolio may not serve their immediate purposes. The one thing that you can always trust people to do is to follow a course of action that they perceive to be in their self interest. You almost never find an altruist in this world and this holds true in the field of investment advice.

That doesn't mean that you can't specialize. There is no need for you to be in a category of investment that you don't have faith in just for the sake of diversifying. You pick the category you like the best and then you diversify within the framework of that category.

That's what I do at regarding real estate investments. And whether you invest with me or by yourself that's what I believe you should do. And, I don't suggest that you put all of your eggs in the real estate basket. Real estate is appropriate for part of your portfolio and as a real estate coach I can help determine the proportion that is right for you.

Once you have determined the amount of your eggs that are appropriate for the real estate basket, then you need to narrow your perspective on the appropriate real estate investment.
You do this by selecting your best choices and then ordering your priorities among those choices. I believe that real estate should often play a meaningful role within a balanced portfolio.

Well-selected and well-managed real estate investments provide a nice balance with the other assets that people typically invest in, including their own home, stock portfolios, retirement savings plans, and private businesses.
Real estate investments have a different profile than many of these other investments and are effected by different factors, which place them in a truly different basket. Therefore they really do help diversify a portfolio and create balance through both good and tough times.

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