Real estate - A fascinating investment option

Diversifying investments is considered a good strategy to avoid "putting all your eggs in one basket." When I was a young college student at the College of Management – academic track, my lecturer, Dr. Avi Masika, equated diversification to a laundry hanging on a line swaying in the wind. The clothes on the line sway up and down, but the laundry remains in the same place. Statistically speaking, we can use the term 'correlation'. We want to create a well-diversified investment portfolio that yields high returns while avoiding significant correlation between the different investments.

According to an article by Doron Keren on Marker on July 12, 2021 'The Revolution Changing the World of Investments – and What We Can Learn from Yale University', the exposure of global entities to alternative investments indicates that the investment landscape is adapting to the changing economic reality. For example, Yale University, with a portfolio worth over $30 billion, recently revealed its current successful investment strategy, which has proven to be highly effective in recent years.

Over the past three decades, Yale has gradually reduced its dependence on local stocks (in the US) in favor of investing in "non-traditional" assets. In 1989, about 75% of Yale's investment portfolio was allocated to stocks, whereas today, their stock market allocation is only about 10%. The main portion of their investments is in real estate assets (9-11%), followed by hedge funds, infrastructure, growth companies, emerging markets, and more.

David Swensen, Yale's legendary investment manager, was one of the early pioneers of investing in alternative assets. Under his management, Yale has become the third wealthiest university in the United States. Since taking on the role in 1987, he has never had a negative year, even during the 2008 financial crisis. It's no wonder that Harvard University decided to study this phenomenon, and others have adopted his investment approach.

So, essentially, it seems that allocating a portion of your investments to alternative investments, and perhaps even real estate, can be a good idea to achieve higher returns and better diversification.

A word about asymmetric information: When you invest in local real estate, you gain knowledge and expertise in that specific investment area through research and experience. In essence, you turn your local knowledge and familiarity into an asset.

Similar to understanding that the best restaurant in town for you isn't necessarily the most expensive one, you can also identify the most suitable property for investment.

Of course, it is highly recommended to research, learn, and seek the expertise of professionals such as brokers and investment advisors to maximize your investment in the chosen area.

The above statement should not be construed as investment advice, pension advice, or any specific recommendation. The statements above do not constitute investment, pension, tax, or substitute advice, taking into account individual data and specific needs. | T.L.C.