Uncle Wang, who lives downstairs, is a retired worker, 60 years old this year, and relies on the money he saved in his early years to buy a few old houses for rent to sustain his life. It sounds like Uncle Wang's life is quite comfortable, but recently he has been complaining downstairs: “The rent hasn't gone up year after year, but the maintenance costs keep increasing, making me wonder if I bought this house at a loss!”

Uncle Wang's situation is actually not uncommon. He bought several properties early on, but their locations are not great, far from the city center, and they are older, resulting in low rental yields. The monthly rent is just enough to cover the property fees and daily maintenance. He looks at the large amount of money he has invested but finds the returns are far lower than he imagined.

During a chat, I couldn't help but ask Uncle Wang: “Have you ever thought about selling these properties and switching to a different investment method?” Uncle Wang was taken aback: “What else can I invest in? Buying houses has been the most familiar to me after so many years.”

Uncle Wang bought his house 20 years ago when prices were low and rental yields were high. But now the market environment has changed; the location and quality of the house are no longer appealing, and rental yields have declined year by year. Uncle Wang has been holding onto the belief that 'not selling the house preserves its value,' ignoring the opportunity cost.

• Investment requires dynamic adjustment and cannot solely focus on past experiences. With changes in the market environment, old investment methods may have lost their advantages.

• Opportunity cost is an important consideration: If funds can achieve higher returns in other fields, it is necessary to reassess the rationality of current investments.

Uncle Wang's funds are almost entirely tied up in real estate, making him particularly sensitive to fluctuations in rental income. If there are fewer tenants or if maintenance costs increase, cash flow will become problematic.

• Diversified allocation can reduce the risks associated with a single asset. Instead of investing all funds in real estate, it is better to try a combination of various asset classes such as stocks, bonds, and funds.

• While real estate investment is stable, it has poor liquidity (selling a house takes time) and is sensitive to market changes, so one cannot rely on it too much.

Although Uncle Wang's old house has appreciated in value, the rental yield is less than 2%, far below the returns from other stable investments in the market. For example, money market funds, bonds, or even some index funds can provide higher annualized returns.

• The real yield is the core standard for measuring the quality of an investment. Rising house prices or asset appreciation is merely paper wealth; assets that cannot be effectively liquidated or generate stable cash flow have their investment value worth re-evaluating.

Following my advice, Uncle Wang decided to try adjusting his investment strategy:

1. Sell two old houses: Selling the properties located in remote areas with low rental yields generated 1.5 million in cash flow.

2. Reallocate funds:

• 1,000,000 invested in a stable blue-chip index fund in the stock market, with long-term returns expected to reach an annualized 6%-8%.

• 500,000 for purchasing an annuity insurance to secure his retirement and provide stable cash flow.

A few months later, Uncle Wang obviously felt much more relaxed. He smiled and said, “I used to worry about collecting rent, but now I've diversified my money into several places, so I no longer have to worry about vacant properties!”

• Dynamic portfolio adjustment: The market environment is constantly changing, and investments cannot rely solely on past experiences; they need to be adjusted in a timely manner according to new economic trends and personal needs.

• Diversify risks: Do not put all funds into a single asset; a diversified allocation can better cope with market fluctuations.

• Focus on yield: Pay attention to the actual returns of assets, rather than just looking at the nominal value of the assets.

Uncle Wang's story tells us that investment is not a “one-time fix.” The market environment will change, and personal needs will also change. Only by timely adjusting investment strategies and reallocating funds to more efficient and suitable areas can wealth grow more steadily.

Whether it's real estate, funds, or other assets, the key is to recognize your goals and assess the value and returns of each investment. Does your investment approach also need an 'upgrade'?