All assets involve risk and no asset is guaranteed against fluctuations in its price. While this is true of real estate, the long-term trends in real estate prices are generally more predictable-in large part because the overall amount of land is fixed by nature.

Melbourne real estate has yielded significant capital gains in the past but no one knows for certain what the future will bring. For property this means that tomorrow's capital gain will not simply be a repeat of what happened yesterday.

Asset markets are notorious for over reacting-real estate is no exception to the rule. The market place over reacts to both good and bad news-it is prey to fads and fashions. This characteristic, however, creates enormous opportunities for the astute and disciplined investor. Remember, in the short run, the market is a voting machine but, in the long run, it is a weighing machine.

Investors need to be aware that, in general, risk and reward go hand in hand-the higher the return, the higher the risk. The most important thing that investors can do is to ensure that they do not take on board any more risk than is necessary to achieve the return that they desire. It is that excessive risk that often brings investors unstuck.

Astute investors reduce their risk by diversifying their investments across the range of different assets-for example real estate, shares and bonds. A well-balanced portfolio will always include real estate.

Astute investors know that timing is critical. This is not a matter of judging when to enter or exit the market-for that is usually very risky-but how long to stay in the market. The longer the time of the investment, the less the risk and the higher the return.

	prices of all assets fluctuate
	no-one knows what the future will bring
	markets do over-react
	uncertainty creates opportunity
	higher returns means greater risk
	diversification reduces risk
	time in the market reduces risk