What are the Risks of These Stocks?
Real estate stocks would have five main risks, which investors should take into consideration:
By investing in real estate, you invest in just a single sector. The real estate sector’s fortunes can be dependent on specific events (economical, political, demographical). Therefore, it is advisable to invest in these stocks as part of a broader portfolio.
Real estate stocks might be denominated in another currency than the investor’s. If this currency depreciates, so too will the investor’s capital.
Real estate investments are typically partially financed by debt. If interest rates rise, this leads to higher financing costs and lower profits.
Changes in the political landscape resulting from political shifts, social unrest, riots, (civil) war or terrorism can, for instance, pose a risk for the Company.
The purchasing power of the invested euro, and by extension the value of the investment, can decrease as a result of monetary depreciation.