The beginning of 2022 has been pretty unkind to stock traders. For weeks now, the stock market has been stagnant in correction stages, and while that is not an alarming amount of time, it is still unsettling.
What is scary about this is that we do not know how long it is going to take for stocks to fully recover from this recent downtrend. There is growing concern about tensions overseas and inflation which are both factors that contribute to a fall in stock prices.
Unfortunately, this will not be the only stock market correction traders will have to go through. Corrections tend to occur often. And sometimes, they will evolve into a complete stock market crash.
If you are worried about that, it pays to think about branching out into the real estate world. In fact, your investments in real estate might be a lifeline when the stock values tank. Here is why.
1. You could tap your home equity instead of liquidating stocks at a low
Investors are often told not to touch their portfolios during a stock market crash to help avoid locking in their losses. But when your short on money, that is less feasible.
If you were to load up on several income properties, though, then you might not have to start selling off stocks at a loss when you’re in need of the money. That is because you might have the choice to borrow against the equity in your investment properties.
Of course, it could take a while to build up that amount of equity. But if you were to hold your properties for years, there is a good chance they will gain value the same way stocks do over time.
2. You can use your rental income to help offset losses within your portfolio
Owning rental properties is an excellent way to produce consistent income. And that can come in very handy when the stock market crashes. If you have income from rental properties flowing into your bank account, a short term loss in your stock portfolio is something you may be able to ride out more easily.
3. REIT dividends could minimize the pain when stocks fall
It is possible to invest in real estate without having to buy physical properties. Instead, you could load up on real estate investment trusts otherwise known as REITs.
REITs are businesses that own and manage commercial or residential properties. There are various REIT sectors you could invest in, and as is the same case with stocks, diversifying is better. That can mean owning a combination of data center, industrial, retail and healthcare REITs.
Stock market crashes are difficult even for some of the most seasoned traders. But diversifying into the real estate world can help you get through that prolonged downturn. So, it can pay to explore all of your options, whether by virtue of purchasing homes to rent out or by investing in REITs and enjoying all the ongoing income they generate for your portfolio.