Relative to a traditional portfolio composed of 60% large-cap stocks and 40% bonds, a portfolio which includes some allocation to private real estate has historically shown the ability to drive higher returns, with generally more annual income and lower volatility over the past 20 years.1 Learn how allocating 20-30% to private real estate could impact your portfolio.
Year after year, real estate has proven its ability to deliver superior income streams to investors.
While other types of investments zig and zag, real estate has a reputation for staying steady
Managing your portfolio’s risk doesn’t need to mean sacrificing return potential.
Real estate has a well-earned reputation for being a reliable source of passive income. In fact, the income component of the NPI (the index that tracks private real estate performance), has averaged a higher rate than the yields of these other major asset classes:
Represented by the Bloomberg Barclays U.S. Aggregate Bond Index, a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS and CMBS (agency and non-agency).
Represented by the National Associate of Real Estate Investment Trusts (NAREIT) All REITs index, a market capitalization-weighted index that and includes all tax-qualified real estate investment trusts (REITs) that are listed on the New York Stock Exchange, the American Stock Exchange or the NASDAQ National Market List.
Represented by the National Council of Real Estate Investment Fiduciaries (NCREIF) National Property Index (NPI). This index goes back to 1978 and includes over 8,300 properties comprising over $658 billion in market value. Its objective is to provide a historical measurement of property-level returns to increase the understanding of, and lend credibility to, real estate as an institutional investment asset class.
Represented by the S&P 500, an index of 500 stocks chosen for market size, liquidity and industry grouping, among other factors. The S&P 500 is designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe (Investopedia).
Of the four major asset types now readily available to online investors, private real estate generally mitigates risk while still prioritizing attractive returns, as shown here.
| Total Return | Volatility | Sharpe Ratio | |
|---|---|---|---|
| Stocks | 6.56% | 18.07% | 0.22 |
| Bonds | 5.03% | 3.43% | 0.74 |
| Publicly traded | 11.28% | 18.68% | 0.47 |
| Private real estate | 8.73% | 8.20% | 0.76 |