Volatility Reduction

Beyond the natural volatility-reducing tendency that occurs through diversification from the process of adding uncorrelated assets to a portfolio, real estate as a freestanding investment also offers its own isolated low-volatility attributes. While the amount of volatility in returns that occurs for a real estate investment depends on the type of real estate strategy employed, the generalization of real estate returns having lower volatility than some other asset classes over the long term has merit. As illustrated in Table 5.1, both core real estate (measured by the NCREIF National Property Index) and REITs (measured by the NAREIT Index) experienced lower volatility of returns than U.S. equity from 1996 through the second quarter of 2006. During the same time period, core real estate also registered lower volatility of returns than inflation-linked bonds (Treasury inflation-protected securities [TIPS]), the high-yield bond market, and the U.S. bond market.

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Real Estate Investment Secrets

Real Estate Investment Secrets

Discover the Jealously Guarded Insights of Real Estate Tycoons and Hot Dealers! Back in the days of the wild, Wild West, when easterners traveled across this vast country looking for opportunity in the newly opened territories, they were often referred to as a ‘tenderfoot’.

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