Chances are, your family home represents the lion's share of your investment portfolio. If so, your wealth will be significantly altered by changes in local real estate prices. It could well be to your advantage to hedge against the loss you would incur if the local real estate market went down.
On the other hand, you may want to increase your investment in real estate ... but the high cost of property, or the time and effort involved in acquiring and managing it, may be more than you are willing to take on. You'd like a simpler way to add more real estate to you portfolio.
Where in the financial world can you go to meet these investment goals?
HedgeStreet is a new online market where you, as an individual trader, can hedge or speculate on the economic factors most relevant to your everyday life. HedgeStreet's unique financial instruments, called Hedgelets, combine low per-instrument prices (under $10), simple yes/no outcomes, and clearly defined potential gains and losses appropriate for the common investor. Hedgelets greatly expand the investment options and strategies available to you.
HedgeStreet's real estate Hedgelets let you take positions on whether a regional index of housing prices will rise or fall in a quarter. You can use real estate Hedgelets to:
- Hedge against loss of value in your home or other real estate
- Speculate in major real estate markets across the U.S.
- Invest in real estate without buying property
Hedging Your Current Real Estate Holdings
Hedging is a risk-management strategy that lessens the impact of market volatility on your future gains or losses. If real estate dominates your investment portfolio, you can hedge your risk (i.e., lower the amount you could potentially lose) by purchasing Hedgelets that pay out if the value of your real estate falls. Your exposure to real estate price changes is lessened because:
- If real estate prices go down, profits from your real estate Hedgelets compensate for the loss of value in your real estate.
- If real estate prices go up, gains in the value of your real estate compensate for losses on your real estate Hedgelets.
You can tailor your positions in real estate Hedgelets to minimize volatility to a level you're comfortable with.
Speculating on the Real Estate Market You Know
Before HedgeStreet, the only way most investors could speculate on real estate was by purchasing and selling properties. Clearly, that investment option has some serious limitations.
- What if you believe housing prices in your area will rise, and would like to invest a few thousand dollars in local real estate?
- What if you believe local housing prices will fall, and would like to invest based on that belief?
The conventional real estate market does not support small investments or shorting. But Hedgelets let you invest whatever amount you choose on either a rise or a fall in housing prices.
Explore Your Real Estate Investment Opportunities on HedgeStreet
Find out how you can make real estate a more dynamic and flexible part of your
investment portfolio by visiting HedgeStreet at www.hedgestreet.com/realestate.
The first article in the series is here.
The second article in the series is here.
The third article in the series is here.
