Barbara Corcoran’s Hottest Take on Investing — Is She Right?
Written by
Sean Bryant
Edited by
Rebekah Evans
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Everyone has an opinion, especially when it comes to investing. Barbara Corcoran is no different with her hot take on the best investment strategy available on the market. Below, we’ll cover Corcoran’s investment hot take and what other experts think about her controversial opinion.
Diversification Who? Real Estate is the Way to Go
Corcoran believes that real estate is the one path to becoming wealthy. While other financial experts advocate for portfolio diversification, Corcoran does the opposite, investing all of her funds in real estate.
One of the major hurdles holding investors back is market uncertainty. Trying to time the market can result in missed opportunities. There is never a “good” time to buy real estate. Instead, building wealth through real estate is all about holding your investments for the long term.
Corcoran said you should invest when you’re financially ready and play the long game rather than trying to time the market. If you cash out the moment the market swings in the right direction, you will miss out on the long-term rewards and appreciation that can accrue over time. Corcoran rarely sells her investments.
Barbara Corcoran’s Investment Rules
While Corcoran might not diversify her portfolio, she also isn’t making blind investments. Her first rule is to know the market, including property values, neighborhood demographics and rental trends. Just like any other investment, you need to know what you are getting into.
One way to find good investments is to picture yourself in the property. Would you live there? Would you want to own the property for at least two years? If not, Corcoran believes you need to look elsewhere.
Real Estate Alternatives Picked by Experts
Corcoran’s hot take directly contrasts with countless financial experts. One of the core principles that many investors follow is diversification. Diversification has the ability to reduce overall portfolio risk. When one type of investment decreases, others generally remain stable. For example, if real estate prices are tanking, your stock portfolio might be holding strong.
Corcoran’s hot take doesn’t mean you can’t have the best of both worlds. If you are concerned about putting all of your investments into real estate, consider diversifying. For example, maybe you have a stock portfolio alongside your real estate portfolio.
“I disagree with Corcoran,” said Robert Johnson, Ph.D., chartered financial analyst (CFA), chartered alternative investment analyst (CAIA), professor of finance at Creighton University and gounder and CEO of Economic Index Associates. “My belief is that many investors are overly enamored with real estate. Too often people make the mistake of spending too much of their income on a house and effectively ‘crowding out’ other investment opportunities.”
Moreover, getting started investing in real estate can be expensive, especially since most investment properties require a 25% down payment. Investing in the stock market and other options usually has lower barriers to entry. If you choose to invest in real estate, consider saving money in a high-yield savings account or in low-risk market investments. This strategy can help you generate extra income from your investments while saving enough money to buy property.
“Many people mistakenly believe that real estate is a good and safe investment. They fall prey to stories of RE values rising dramatically over long periods of time. What they don’t realize is that from 1890 to 1990 the inflation-adjusted appreciation in U.S. housing was just about zero,” Johnson added.
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