Many individual investors’ portfolios don’t include any real estate investments. Usually this is not by design. Rather, it reflects the lack of attractive options for investing in real estate, as well as a bias toward stocks and bonds because they are readily available and easier to research. New, online real estate fund investment platforms and real estate crowdfunding sites are changing this and creating new opportunities for individual investors, family offices and their advisers.
A quick look at the historical returns reveals not only has real estate outperformed the S&P 500 by a wide margin, but also it is less volatile and provides diversification. Let’s look at each of these factors.
If you had invested $100 in a portfolio of institutional quality real estate in 2000, that investment would be worth $415 as of March 31, 2016. That’s a 9.2 percent average annual total return. The same investment in the S&P 500 would be worth $192.