The word “diversification” is often used when discussing wealth creation strategies and especially in the past year or so with the APIL Industrial Fund No. 1. The APIL Industrial Fund No. 1 offers investors income diversification, tenant diversification and geographic diversification. Let’s look into diversification to learn more about the importance of this in your investment strategy.
What is diversification?
Diversification is an investment strategy that lowers your portfolio’s risk and helps you achieve more stable returns. Diversification lowers your portfolio’s risk because different assets can perform differently at different times. If one asset under performs, you won’t lose all your money or income. Having a variety of investments with different risks will balance out the overall risk of a property portfolio. In a nutshell, diversification means not putting all your eggs in one basket.
Importance of diversification with investment/wealth creation
Diversification is important in investing because markets are fluid and subject to changes beyond the control of the investor. By diversifying your portfolio, you reduce the consequences of a wrong forecast. Diversification is your best defence against a single investment failing or one asset performing poorly.
Types of ways investors can diversify (geographic, income sources, asset types – industrial, shopping centre, large format, office)
One of the simplest ways of diversifying your investments is by investing in several different assets rather than just one, if you’re financially able to do so. For example, buying units in several APIL property syndicates will achieve a degree of diversification.
Within each asset, it is possible to diversify further. At APIL, we specialise in acquiring attractive commercial property investments for investors. Across the commercial property sector, investors can diversify across different industries such as retail, office and industrial properties and then diversify even further again with geographic diversification by investing in different locations. The majority of APIL investors regularly invest in each syndicate APIL launches to diversify their portfolio and ensure they don’t have all their eggs in one basket.
An easy way to determine if your portfolio is diversified is by looking at your current performance. Diversified investments won’t all achieve the same return at the same time. If some of your investments are up while others are down, you’ve got diversification.
APIL Investor Case Study 1:
In 2012 Investors G & H* invested in their first APIL property syndicate with their Self-Managed Super Fund. Since that time G & H have invested in eight other property syndicates with amounts between $50,000 and $150,000 for each one with a total investment of $670,000. Each month they currently receive $3500 in cash distributions.
APIL Investor Case Study 2:
Investors L & F* have invested $190,000 across four APIL syndicates. L & F receive a total of $14,125 per year in cash distributions.
*Real names have not been revealed to protect the investor’s privacy.
Note past performance is not a reliable indicator of future performance