Every investor has their reasons for investing but the ultimate goal is more or less the same: to make a profit. However, in a world with seemingly endless options, varied opportunities and little time, how can you enter the investment world with confidence and avoid some of the most common investing mistakes? Read our article to find out and discover why crowdfunding in real estate could be a good solution for beginner investors.
1. Hunting for Performance
Many beginner investors select assets based on their current investment performance. Good existing performance can prompt investors to make rash decisions as they worry they will miss out on great returns. However, simply because a particular asset has performed well for several years does not mean that it will continue to do so in the future. Rather, what good performance now means is that it was a good idea to invest in this asset about three or four years ago.1 RealtyBundles understands this and while we display past performance in our regular reports, we always warn our investors that past performance is not indicative of future performance.
2. Ignoring Risks
An investor must always consider their risk tolerance or capacity to take on risk. Some investors may find it difficult to work in a volatile market with all its ups and downs. These investors may prefer secure, regular interest and income. In this case, investors can opt for more stable and time-proven markets, such as real estate2 or they can go further and choose an innovative model such as property crowdfunding. RealtyBundles implemented this model to offer investors the opportunity to benefit from asset portfolios in various countries. Nonetheless, it is important to remember that any type of investment involves risk.
3. Not Doing Your Homework
Beginner investors can sometimes abandon the research they need to do before making a real estate investment. Research is crucial for success because it allows investors to understand the market and its patterns and gain valuable financial insights. In short, research helps investors understand what they are getting into.3 RealtyBundles aims to help investors with this potentially onerous task by offering ready-made investment solutions. Daily property management duties are carried out by knowledgeable local real estate agencies who are experts in their respective fields and can find below-market-price deals. In turn, RealtyBundles manages these agencies on behalf of its investors.
4. Putting All Your Eggs in One Basket
Diversification can be a good way to protect your investment. A portfolio with multiple investments can weather periods of big price movements and volatility. In particular, when one asset is underperforming, another asset can compensate for this underperformance.4 RealtyBundles embraces diversification by offering asset portfolios inside of which are various properties that differ in terms of type and location. There is thus no single point of asset failure in a RealtyBundles Property Bundle. If one property does not perform well, the portfolio is supported by the remaining assets.
5. Withdrawing Investment Gains Early
Beginner investors often expect to get their hands on their first gains far too early. When they do not see immediate progress, investors may withdraw their investment only a matter of months after making it. Instead of abandoning your investment, a good strategy can be to look at its three and five-year projections.5 Understanding this tendency, RealtyBundles creates financial projections for the coming three years as we consider this an optimal timeframe for holding a real estate investment. Forecasts for the three years are reflected as a per annum average.
RealtyBundles aims to create a transparent investment marketplace that can help investors confront all the aforementioned pitfalls of investing. We believe that it’s possible to avoid all of these common mistakes.
Do you want to learn more about our current offers? Please visit our real estate crowdfunding platform