Interesting article recently, with a quote by NERA Economic and Consulting Mercer associate director Hird, who believes that investors aiming for a 15 per cent annual return with minimal risk should have at least 60% of their portfolio in residential real estate. Hird's opinion is that real estate’s lower volatility makes it the perfect companion to diversify an investor’s share holdings, as shown by the property sector’s strength during the 1987 stock market crash and the more recent 2001 technology stock correction. But is this type of thinking sustainable in the current market and for the next 20 years? Hird thinks YES, as evidenced by this quote: “We see the major factors that drove those returns over the last 20 years as being the same, if not stronger, over the next 20 years,” he said. The report identifies those factors as: the relatively fixed supply of real estate offering the amenities people tend to value (eg. urban housing close to employment, transport etc.); population growth; falling household size; growing household incomes; and the availability of housing finance. Hird said these factors had driven house price increases to the point where prices as a multiple of average weekly earnings were higher than historic averages. While some analysts view this as unsustainable, Hird is not among them. What do others think? Is 60% or more of your portfolio tied up in real estate?