The world around us is going increasingly digital. Data centers have seen a notable uptick in demand because people are continuously working and communicating digitally, as well as buying things online instead of in stores.

The whole digital trend has expanded to encompass the world of real estate investing. And these days, many people are pouring money into the metaverse.

When you go this route, you're not getting ownership of physical property. Rather, you're gaining ownership of a piece of digital land that may or may not gain value over time.

A person at a laptop.

Image source: Getty Images.

Digital real estate is a concept that could really take off in the coming years -- or it could crash and burn. To me, it's awfully risky despite its recent popularity. And so rather than put my money into digital real estate, I'm planning to stick with an investment that's served me well for many years already.

I'm sticking with REITs

I'm a firm believer in maintaining a diverse investment mix in my portfolio, and I like the idea of branching out into real estate. But I admit that I have a limited tolerance for risk, which is why I've yet to really dabble in not just digital real estate but also crypto, which is another speculative investment.

My risk tolerance is such that I'm also not comfortable owning physical real estate. Buying an income property means bearing the risk that it will sit vacant for months, or that tenants will trash it, or that major expenses will come down the pike that I'll be on the hook to cover.

That's why the real estate portion of my investment portion is loaded with REITs (real estate investment trusts). REITs are companies that make money by owning and operating different types of properties. What I love about REITs is that I get exposure to real estate while limiting my risk.

But to be clear, REITs offer a lot of upsides. First, your REIT shares can gain value over time, especially if you're willing to hang onto them for many years.

Also, REITs are required to pay out 90% of their taxable income as dividends to shareholders. That means that since buying REITs, I've enjoyed a steady stream of dividend income that I've opted to reinvest to grow my portfolio even more.

Of course, I've made a point to choose my REITs wisely. And to that end, I've actually jumped on the digital bandwagon to some degree by investing in data center REITs. But while I'm comfortable going that route, the metaverse in all of its glory just isn't something I can get on board with. And so I'm staying away -- at least for the time being.

Stick to your strategy

My investing strategy hinges on buying shares of quality businesses across a range of industries and holding those investments for many years -- all the while reinvesting any dividend payments that come my way. My strategy also hinges on investing in businesses and concepts I fully understand and can see making money.

Digital real estate just doesn't fall into that bucket for me, just as crypto doesn't. I'm made my peace with the fact that speculative investments just aren't my thing. If you feel similarly, digital real estate may be the wrong choice for you.

If your appetite for risk is healthier, sure, go ahead -- invest in the metaverse and see where it leads you. But if you want to take a less-risky approach to real estate investing, it could pay to look to REITs instead.