Defined as the practice of investing in a manner that reduces risk and increases stability, diversification is an important part of any financial plan. The more assets you can spread out and invest in, the less risk there is to your overall portfolio. Being properly diversified allows you to rest soundly at night, knowing that even if one investment goes down drastically, the others will help make up for it.
Using a 1031 DSTS
By using a 1031 Delaware Statutory Trust (DSTS), you can improve your portfolio’s value by creating new assets without having to sell what you already own or incur capital gains taxes on those assets. This article will show how easy it is to do both while enjoying long-term benefits for your portfolio.
In order to diversify your portfolio, you must first have a portfolio. A 1031 DSTS is a specific type of trust that contains multiple properties, which can then be sold or transferred into other investments without incurring taxes or selling everything you already own outright. When all the transfers have been made among the 1031 DSTS and its investing partners through securities exchanges, the transferor has no further financial ties with their initial properties.
These properties can stay in the trust or be sold and converted into cash, which can then be reinvested. This is a great way to diversify your portfolio because it allows you to invest in many different types of investments without having to sell what you already own outright.
Benefits of Using a 1031 DSTS
Using a 1031 DSTS provides investors with several immediate and long-term benefits. These include:
Long-Term Investment Growth
By investing in many different types of assets, you can rest easy knowing that your portfolio is better protected against financial hardships such as rising interest rates or economic recessions. The benefits of diversification in a 1031 DSTS can help protect what you’ve already worked hard to achieve in the future.
No Capital Gains Taxes
If you sell an asset for more than its cost basis, then all potential profits are considered taxable income. Even if you don’t receive any money from the sale, but the property rises in value while under your ownership, you must pay capital gains taxes. Using a 1031 DSTS allows you to transfer properties into new investments without having to pay capital gains on them, which can then be reinvested into your portfolio instead of being taxed.
Build Wealth Over Time
A growing asset base gives investors the ability to reinvest potentially higher future values back into their portfolios. Leveraging equity in your real estate assets through a 1031 DSTS structure can help protect against market fluctuations and provide an opportunity for longer-term growth.
Liquidity is closely linked with diversification because it provides the potential to sell any or all of your assets at any time if needed to raise cash or meet unforeseen financial obligations. Having liquid funds available helps investors make wise decisions about leveraging their portfolios. Using a 1031 DSTS can help you take advantage of selling one property to pay for another, which helps increase the overall size of your portfolio without incurring capital gains taxes until the properties are sold individually.
Benefit from Tax Deferral
Through proper planning, investors who use a 1031 DSTS to invest in real estate assets they already own enjoy the financial benefits of tax deferral when they sell their properties. This is especially beneficial considering that they would not have had to pay capital gains on the initial properties if they had transferred them into this trust instead.
Why You Need a Diverse Portfolio
A diverse portfolio is one of the keys to a successful financial life. It allows you to invest in different assets and use funds from those investments for other purposes. Using a 1031 DSTS can help protect your portfolio and provide many advantages as long as you work with an experienced team of professionals who can properly structure your trust, advise on how it should be used, and manage the process.
The 1031 DSTS is a trust designed specifically to diversify your portfolio and help protect it from market fluctuations by transferring ownership of various properties into one or more new investments. These transfers can be done without incurring capital gains taxes on the initial properties, which helps investors increase their overall wealth over time.
If you are looking for a way to diversify your portfolio, reduce the need for capital gains taxes, and still enjoy long-term growth potential, then consider using a 1031 DSTS. The benefits of using one are numerous. For more information on how this Delaware Statutory Trust can help you create new assets without having to sell what you already own or incur capital gains taxes on those assets, call us today. We’d love to connect with you!