Why the Top Asset Allocation Models Include Real Estate

Frank Roessler

January 24, 2023


The best asset allocation models include real estate as part of their portfolios. Why? Because it is an essential factor in an investment strategy. However, it is not enough to make an allocation. You also have to know how to use it properly. Here are some tips for getting the most out of the real estate in your investments.

Lifecycle funds

A lifecycle fund is a type of mutual fund targeted toward retirement. These funds are typically offered in 401(k)s to simplify investing. However, they are subject to fees and expenses. The key is to choose a fund that fits your target year, asset allocation, and risk tolerance.

Generally, a lifecycle fund starts aggressively and rebalances gradually toward a more conservative investment mix as your retirement approaches. In 2025, a lifecycle fund will have roughly 80% of its assets in stocks and 20% in bonds. By 2050, a lifecycle fund will have approximately 40% in stocks and 60% in bonds.

Lifecycle funds are available through most major mutual fund companies. They can be an excellent option for investors looking for an all-in-one investment strategy.

Financial Samurai

The Financial Samurai is undoubtedly the largest independent personal finance site on the Internet. It’s also reasonable when it comes to real estate. Its founder possesses a knack for identifying good deals and bad ones. His favorite pastime is the real estate trade. He’s got a real estate portfolio of over 100 properties, a full-time staff and a growing list of discerning investors. He’s so enamored with the industry that he’s started his own absolute estate-based investment fund. At one point, his portfolio accounted for more than 40% of all the rentals in the state.

He’s not a purist, though. A hefty slice of his pie is now under management in a series of real estate-backed mutual funds, a feat that would have seemed impossible a few decades ago.

Three-fund portfolios

Three-fund portfolios are a relatively simple way to create a diversified portfolio, providing the security of bonds with the potential growth of stocks. If you’re a new investor or want to build wealth, this strategy can help. Before you invest, you’ll need to decide your risk tolerance. You’ll also need to determine what asset allocation best suits your needs.

Most three-fund portfolios are constructed with low-cost index funds. These are simple and inexpensive ways to create broad diversification. However, investors should pay attention to the expense ratios of the individual funds they buy. Some index funds have an expense ratio under 0.5%, while others have an expense ratio as high as 2%.

When choosing which index funds to include in a three fund portfolio, you’ll want to consider your overall risk level and your time horizon. For example, suppose you are saving for retirement. In that case, you should allocate a more significant percentage of your portfolio to stock market mutual funds. At the same time, a younger person might prefer a smaller allocation.

Alternative investments

An asset allocation model can be a valuable tool for incorporating alternative investments into a portfolio. However, it is essential to understand the risks associated with these investments and their potential role in a portfolio.

Alternative investments offer investors a more comprehensive range of options than traditional ones. This can include hedge funds, private equity, and real estate. The benefits of diversifying your portfolio can mitigate the impact of market volatility. They can also provide a higher level of returns than fixed-income investments.

Alternative investment strategies have become more accessible to individual and institutional investors. The total number of alternative assets under management is expected to grow to $17.2 trillion by 2025.

As with traditional investments, alternative investments can have a high risk. Some of these risks include illiquidity and time horizon risk. If you are considering an alternative investment portfolio, it is best to determine your risk appetite, investment horizon, and goals before making a decision.


Diversification of real estate asset allocation models is essential for reducing risk. It is a technique that combines several investments into a single portfolio to smooth out the idiosyncratic and systematic risks associated with each investment.

Adding illiquid alternative investments to your portfolio can help you reduce risk. The Internet has also opened doors to new forms of investing, including crowdfunding.

Diversifying real estate asset management models can be achieved across multiple sectors and companies. Investing in different countries can also increase the degree of diversification.

A good diversification strategy should be customized to your financial goals and tolerance for risk. Several strategies, including dollar-cost averaging, are available. While these methods work, there are other ways to diversify.