The world around us is becoming more and more digital. Demand for data centers has increased significantly as people continue to work, communicate and shop online instead of in stores.
The entire digital trend has expanded to include the world of real estate investing. And these days, a lot of people are pouring money into the metaverse.
When you go this route, you are not taking ownership of physical property. Rather, you are taking ownership of a digital land that may or may not increase in value over time.
Digital real estate is a concept that could really take off in the next few years. Despite its popularity these days, it’s very dangerous to me. As such, rather than investing my money in digital real estate, I plan to stick with the investments that have served me well over the years.
I’m sticking with REITs
I am a firm believer in maintaining a diverse investment mix in my portfolio and I like the idea of reaching into real estate. However, I admit that I have a limited tolerance for risk. As such, we have yet to dabble in digital real estate, as well as another speculative investment: cryptocurrencies.
My risk tolerance is such that I’m not comfortable owning physical real estate. Buying an income property means running the risk of it sitting vacant for months, being scrapped by the tenant, or incurring significant expenses.
So the real estate portion of my investment portion is REIT (real estate investment trust). A REIT is a company that makes money by owning and managing various types of real estate. What I love about REITs is that they allow me to invest in real estate with less risk.
But let’s be clear, REITs have many advantages. First, REIT stocks can grow in value over time. Especially if you intend to keep it for many years.
Also, REITs must pay 90% of their taxable income as dividends to shareholders. So, since I bought the REIT, I’ve been enjoying stable dividend income and decided to reinvest to further grow my portfolio.
Of course, I try to choose my REITs wisely. To that end, I have somewhat jumped on the digital bandwagon by investing in data center REITs. But while I’m comfortable going down that path, the glorious metaverse isn’t something I can get into. So I’m staying away – at least for the time being.
stick to your strategy
My investment strategy relies on buying stocks of quality companies in a variety of industries and holding those investments for many years. My strategy also hinges on investing in businesses and concepts that I fully understand and can make money from.
Digital real estate doesn’t fit that bucket for me any more than cryptocurrencies don’t. I have come to terms with the fact that speculative investing is not my thing. If you feel the same way, digital real estate might be the wrong choice for you.
If your appetite for risk is healthy, invest in the Metaverse and see where it takes you. However, if you want to take a less risky approach to real estate investing, we recommend looking at REITs instead.