Property Investment Strategies

Using collective investments to gain property market exposure

by Nick Wallwork on April 25, 2015

Property Market ExposureThere are many different ways to gain exposure to the worldwide real estate market with collective investments proving to be very popular amongst smaller inexperienced investors. Historically many of these collective investments tended to give you a broad spectrum of exposure to an array of different countries, markets and types of property. However, as the world of investment continues to expand and develop there is now an array of collective investment which will allow you exposure to specific areas of the real estate market.

Benefits of collective investments

In simple terms collective investments allow you to buy and sell a share of the fund which is managed by a third party offering current and historic performance figures. This will allow you to compare and contrast the performance of your fund against the general market and decide whether to continue, increase your exposure or cash in your chips. The fact that a third party is managing your investment in this particular type of property fund is a major attraction to many people. However, there is obviously a management fee paid to the third party out of the fund.

It is also worth noting that collective investment funds allow you to invest relatively small amounts of money which would not normally be large enough to purchase a property outright. You can also use the “pound cost averaging” process which basically allows you to invest or reduce your exposure in the future. Collective investments are particularly popular with investors looking at the long-term horizon and happy to ride the short-term peaks and troughs.

Focused investments

As we touched on above, historically property collective investment funds tended to give you a broad exposure to the overall market. This may have been based upon a continent, country or any other broader yardstick. The situation today is very different and while you can still gain relatively broad exposure you can also gain specific exposure to individual countries, internal markets and even types of property. The more focused your investment the more volatile the performance is likely to be and you may not necessarily follow the long-term trends of the worldwide or indeed countrywide real estate markets.

This type of investment does allow you to invest relatively small amounts, which would not normally be enough to gain direct exposure to property markets, and hopefully bank investment returns in the longer term. Collective investments are also easier to trade, as those who have bought and sold individual properties will testify to, as you can literally buy and sell your share of the fund at relatively short notice.

Pension fund investments

Collective investments have been very popular with pension funds for many years now as they allow investors to ride the peaks and troughs in the short to medium term while hopefully benefiting from the general upward trend in the longer term. They also take away the day-to-day management of property assets as these decisions are taken by a third party paid to manage the fund. Many people prefer to mix-and-match different types of property collective investments to give them different weightings in different countries and individual markets.

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