Building a top-notch investment portfolio is the key to financial security. At some point in your life, you will need your investments to sustain you. The sooner this happens, the sooner you will have financial independence and peace of mind.

When deciding which assets should be in your portfolio, it’s definitely worth considering adding real estate investments to the mix. There are a few key reasons why investing some of your money in real estate is a no-brainer.

Real estate allows you to diversify

It’s important to spread your money around a mix of different assets so that you don’t suffer outsized losses if a particular company underperforms or a particular industry struggles.

Real estate is another asset class you can put your money in along with stocks, bonds, and commodities.

The diversification that real estate offers means that even if other assets are not doing well in current economic conditions, you still have a chance of making a profit because your real estate investments may perform differently.

There are several ways to earn income from real estate investments

Another big advantage of real estate investing is that your investments can earn money in a variety of ways.

If you buy physical properties, for example, you can make money when they go up in value and you sell them. But if it is rental properties, you can also get regular income from tenants.

A real estate investment trust (REIT) is another great option for earning income from multiple sources. REITs were created by Congress to democratize real estate investing and allow individuals to invest in this asset class even if they could not purchase properties directly. REITs own or operate income-generating properties or finance real estate investments. Many are publicly traded, so you can buy them like stocks, but expose yourself to various aspects of the real estate industry.

REITs are required by law to pay out 90% of their annual taxable income each year as dividends to shareholders. This means you can regularly earn dividend income on an ongoing basis when you invest in it. And can also make a profit if you can sell your REIT shares for more than you paid.

REITs can sometimes outperform traditional stocks

REITs tend to be less volatile than stocks, and stock REITs actually have a good enough track record to provide better returns to investors than stocks.

Between 1972 and 2021, for example, the S&P500 provided average annual returns of 13.1%. Over the same period, equity REITs have provided average annual returns of 13.5%. This means that if you had real estate in your portfolio, you would have done better than if you had only invested in stocks.

There is a long list of specific REITs that have performed well for investors, including these 15 REITs that have outperformed the S&P 500. As you will notice, these REITs give you exposure to a wide variety of commercial real estate investments, including including office space, storage and distribution centers. And, as the graph below shows, some of them, including WP Carey (WPC -0.21%)have a multi-year track record of beating the S&P 500.

Investing in real estate is easy

Many people shy away from investing in real estate because they think it’s complicated and expensive. After all, buying investment property requires a mortgage and/or a lot of money. And if you have purchased rental properties, you will have to take on the task of acting as the landlord.

The reality, however, is that you don’t need a lot of time, money, or knowledge to learn about real estate. You can invest in a REIT with very little upfront money and little knowledge.

Since you can choose an investment easily, start investing with little money, and add a different asset class to your portfolio to diversify your investments and reduce your risk, investing in real estate is definitely a no-brainer, especially when you realize that you can also derive income from it in several ways. With all these advantages, there is no reason not to start investing in real estate as soon as possible.

christy bieber has no position in the stocks mentioned. The Motley Fool has no position in the stocks mentioned. The Motley Fool has a disclosure policy.