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Understanding DSTs as a Diversification Tool
Delaware Statutory Trusts (DSTs) offer a unique way to diversify your investment portfolio. DSTs offer a way to balance your portfolio by diversifying beyond traditional stocks and bonds. Real estate often performs differently than other asset classes, making it an excellent hedge against market volatility and inflation.
Passive Real Estate Investment Benefits
Investing in DSTs allows you to diversify into real estate without the burdens of being a landlord. As passive investments, they provide exposure to income-producing properties managed by experienced sponsors, helping to balance your portfolio with real estate returns.
Accessing Institutional-Grade Real Estate
DSTs also allow individual investors to own fractional shares in institutional-grade real estate, which typically remains inaccessible to most individual investors thus providing opportunities to diversify into premium real estate. With DSTs, you can invest in multiple asset classes such as multifamily, industrial and retail which means you can hedge against risks associated with a specific sector.
Geographic Diversification Advantages
Besides being able to diversify into a variety of asset classes, DSTs also offer access to properties in various locations, allowing you to spread your investments across different regions. For example, a single DST portfolio might include properties in high-growth markets like Texas, California, and Florida. This geographic diversification reduces the risk of being tied to a single market's economic performance.
Risk Management Through Lower Investment Minimums
Speaking of risk, since DSTs often require lower minimum investments compared to direct property ownership, this reduces investors’ individual risk by not being solely responsible for the performance of a single asset.
Income Stream and Tax Benefits
That’s not all. Most DSTs generate consistent rental income from long-term leases or stable tenants. This income stream can diversify your overall cash flow, providing stability even when other investments, like equities, are more volatile. In addition, DSTs are eligible for 1031 exchanges, allowing you to defer capital gains taxes when reinvesting in real estate. By reinvesting proceeds into multiple DSTs, you can diversify your portfolio while minimizing tax liabilities.
For investors looking to balance their portfolios and reduce dependence on traditional asset classes, DSTs are an excellent diversification tool. Keystone can help.
Learn more about our DST strategy and portfolio here or schedule a call with us if you are interested in learning more.