By Investors hoping to grow their wealth right now are set against a number of opposing economic challenges.
Firstly, high inflation raises the pressure for investors to accumulate assets that will grow alongside it or, at the very least, closely follow it.
Failing to do so will result in a depreciation of real-terms wealth – anathema to the objectives of any would-be investor.
Simultaneously, the rise of interest rates across the globe makes borrowing a more expensive proposition than before.
In the UK, the independent central bank, the Bank of England, recently made a historic interest rate rise of 50 basis points.
Most concerningly, these hikes are expected to continue for some time.
As a result, investors hoping to access traditional forms of real estate investment may find the cost of borrowing too inhibitive.
Against this backdrop of uncertainty, the FCA recently unveiled stronger rules that will force firms to adopt explicit descriptions of the risks involved.
The hope is to remove the potential for unforeseen losses as increases in the cost of living could prompt people to chase higher investment returns and increase their vulnerability to misleading financial promotions.
Indeed, it is paramount for investors hoping to grow their wealth throughout this period of turmoil to truly assess the level of risk they are comfortable to balance.
While the above concerns pose a particularly tough set of challenges for newer investors, they are not insurmountable.
Great leaps forward in fractional investment platforms are enabling retail investors to participate in institutional-grade investments that they would have ordinarily not qualified for and reap the benefits of direct property ownership without the associated frictions and complexities.
Real estate – the elusive asset
Real estate as an asset class has a notoriously high price tag.
Property investing has long been a lucrative vehicle for capital gains, but until very recently, it was inaccessible to the general public, due in large part to the upfront capital required to participate.
At the same time, real estate is one of the most historically proven asset classes.
Its flawless track record of delivering capital appreciation and providing shelter from market turmoil is hard to challenge.
Particularly pertinent at the moment is property’s ability to hedge against inflation, as the rental market shows a solid correlation with inflation and sometimes even exceeds it.
This offers rare protection for investors who can, for the most part, be secure that the real-terms value of their assets will not be diminished by inflationary pressures.
However, for far too long, retail investors have been burdened by the entry barriers – industry knowledge and upfront capital – restricting participation in the property development market as well as its lucrative returns.
Demystifying fractional investment
As the name suggests, fractional investment allows investors to put their money into an asset without needing enough capital to purchase the asset outright.
This quite simple yet revolutionary method enables investors to participate from the same attributes as the overall offering yet at a fraction of the price.
In other words, rather than needing to commit the total capital required, investors can simply put in a smaller amount and enjoy some exposure to the increase in value of the underlying asset.
Within the real estate sector, this has proven transformational, unlocking lucrative development opportunities to a wider pool of investors.
Further, this newfound disintermediation enables investors to align their interests with professionals who have the necessary expertise and can conduct the necessary due diligence and oversight on their behalf.
To paint the picture a little more clearly, investors with smaller budgets can now pursue flexible investment opportunities in large-scale development projects, such as the financing of a new block of student accommodation near an internationally prestigious university campus, or a new state-of-the-art eco-friendly residential development in a busy commuter town.
Moreover, fractional investment enables a wider range of investment options to meet different risk appetites and enhanced diversification.
While investors are braving a complex landscape, advances in prop-tech are enabling new and existing players to unlock lucrative opportunities and expand their investment horizons as the traditional rules of investing become fundamentally altered for the better.
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