Should we Specialise or Diversify in the Property Market?

diversificationDiversification is a sound investment principle and there are many schools of reasoning which support the idea. Hundreds of case studies accumulated from the past will tell us how diversification in the property market helped rout out fears of decline in capital growth or fall in rental yield. But we do take time to sit back and notice the other extreme.

Diversify or specialise?

Here I mean the bipolar opposite of diversification which is specialisation. Instead of focusing everywhere and in the process, nowhere (which diversification teaches), wouldn’t it be better to concentrate on one particular area? It is not hard to figure out that we cannot bear the weight of more than one Leonardo da Vinci in the world. Only he was a master of everything. For us mere mortals, the choice is simple. Either to be average at everything we do or to be masters of one particular trait.

The trap of diversification

It works the same way both in life and in real estate. By focusing one’s energy in real estate, the implication is not that we over-invest in one geographical area but it means that we should target properties of similar nature (spread across different geographical areas and different acreage).

Specialisation- a winning plan

This may help us better in formulating a winning plan. Why? 1) Because we will be surefooted enough while investing in something that we specialise in. 2) And because we will understand the nuances of our field of specialisation better, and the ROIs will be higher.

In life just as in real estate

Talking of life, the principle remains the same: Adhere to one path. Try becoming better at it each day and reap the fruits of your mastery. When you have earned enough from it, reinvest your money in some growth generating asset. People who have accumulated a fair bit of money generally choose real estate for the purpose of reinvesting. Of course, you can choose something else: bonds, shares, currencies or collectibles.