Practical Investment Ideas: Pay Attention To Yields, Rental Real Estate 11 comments
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The past few months have certainly been a train wreck for most investors. Professional money managers and individual investors alike - and certainly the overwhelming majority of passive investors whom have contributed through thick and thin into their mutual fund retirement accounts, have suffered.
Emotions ranged from the initial "buy on the dips" to fearful watching of investment banks and Freddie and Fannie imploding, to anger at the home loan practices dictated by Democratic Party social engineering and the Republican failure of leadership to stand up to such foolishness, to abject fear as the market tanked, to skepticism at a government bailout of poor business models, to brief periods of optimism as the market rallied hundreds of points, to despair as the market tanked yet again. And the roller coaster ride continues.
What is the investor to do?
If you were wise not to throw in the towel on your quality securities and selectively sold less stable investments to raise cash, you are probably in a minority. Congratulations. If you did sell out of fear, that is understandable, so long as you do not sour on the stock market or other potentially lucrative investments in the future. And the future is now.
As things stand, I would put idle funds to work in the following way:
Begin to look at stocks earning 5% or greater yield that are traditionally strong companies with earnings and the ability to maintain or increase the dividend. I am providing screening lists regularly of ideas (not recommendations). Yield is the definitive indicator for the astute investor. You have downside protection and cash returns to satisy until the market rebounds.
Look at ETFs such as the PowerShares Financial Preferred Portfolio (PGF), with an 11.56% yield trading about $13.25/share. Vanguard's Short Term Corporate Bond Fund (BSV) is trading on the low side yielding a notch over 4%. Avoid being so conservative that you plunge into almost negative yield treasuries. High Yield ETFs are too speculative for me at this time.
Absolutely, positively begin to think about being a landlord. Rental real estate remains a superb opportunity for income and tax advantages (regardless of whether "That One" or "Yosemite Sam" gain power). Buying right is key. Tenant pools are expanding. For the first time I can recall, all properties under my watchful eye have a waiting list of renters. This covers all rental classes, from luxury to Section 8 government subsidies to common rentals - single or multi-family.
Be mindful that investors that place too many assets into taxable entities are going to be hammered by the anticipated Democratic Presidential, Senatorial and House of Representative victory beginning in 2009. Absolute power corrupts absolutely. And I am especially cognizant of how Chicago-style Democratic politics are played. Investors had better begin to invest in tax-advantaged instruments. Master Limited Partnerships, Tax Credit Housing, general real estate,low-cost annuities, life insurance and trusts should be on your radar screen. It is my belief that financial planners will begin to focus more on tax avoidance than security recommendations, just as they did in the era pre-Regan.
We will hear many sages giving precise instructions on how and when to invest during current turmoil. Remember, almost everyone is paying their mortgage, curbing their debts, making prudent family spending decisions and intent upon making their lives and their family's lives better in this, the greatest country on earth. Invest your hard-earned money in a deliberate and thoughtful fashion, letting it work for you instead of running away into someone else's greedy pocket.
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This article has 11 comments:
Half of the housing in the country has been nationalized with no buyers and they are becoming fewer and fewer. Job losses I read are supposed to go up another million in 2009.
Taxes will be raised to make up muncipality short falls. Water and sewer rates will go up for the same reason as the last.
When things get really bad or the anticipation of really bad news the now nationalized housing will be rented and probably at a much cheaper rate than the open market because the Feds need the money - not because they really want to help anyone, butthis will drive down rents. They might even have rent controls to help house people.
Evictions will become much harder because of the economic climate.
You guys eally need to think about what you are saying.
Real Estate? I am intimately involved in this industry and have more than a clue - I live it, advise it and profit from it. Re-read my nuances in this article. The "little guys" sniping away are always apt to criticize when they are not meaningful players in the game. As a side comment, I do evictions in 16 days - User 52095 must have a weak attorney or poor procedural skills.
anger at the home loan practices dictated by Democratic Party social engineering and the Republican failure of leadership to stand up to such foolishness.
Absolute power corrupts absolutely. And I am especially cognizant of how Chicago-style Democratic politics are played.
It is my belief that financial planners will begin to focus more on tax avoidance than security recommendations, just as they did in the era pre-Regan.
Do we notice a trend here?
The author offers mickey-mouse (Dividends now!) advice that a grade schooler could figure out, suggests that rental property investing is a panacea w/o considering the fact that increased supply will tamp price demand on property owners while inlfation drives up tax and maintenance costs, and expects us to look at his solutions as wisdom!
If he could look beyond his clouded rhetoric about The Mess perhaps he could start from a more basic assumption: how we got into this mess and what policies we should avoid like the plague going forward.
Consider this as a strating point the next time, Mr Feckless:
Flash back to the neo-con's answer to 1970's stagflation and Milton Friedman's Shock Economics Theory he plied so well in South America for the right wing fascists.
Roll tape a bit forward to the Gipper. Cut taxes, spend on defense out the wazoo, run record deficits, de-regulate markets and watch Uncle Milties' magic work.
While every right wing neo-con tape loop is buzzing with out-of-control GSEs and fear and loathing of the coming Democratic landslide, we all seem to conveniently ignore how all of this silly and frightening theoretical economic approach played out around the world through the likes of the IMF, World Bank, Halliburton, and their ilk.
Look at any country where this supply-side, trickle down, deregulated gambit has played and see how eeiry is the similarity between those countries and this one:
1. The top 1% control 40% of all financial wealth in the U.S. The top 20% another 52%, leaving the rest of us (80%) America's financial wealth at a whopping 8%.
2. In terms of inherited wealth only 1.6% inherit moe than $100,000. 91.9% receive nothing. Yet the "death tax" is the highest priority on the ultra-conservative agenda.
Now for some sobering reminders:
Under Clinton we enjoyed a $287 Billion SURPLUS that's now an ever-growing DEFICIT that at last peek was nearing $700 Billion and national debt that has grown from $5.7 Trillion to $10.2 Trillion in just seven years.
It wasn't because Clinton was an economic genious. He simply chose folks who shared his philosophy of government and its role. I'll put my money in the hands of the guys that believe that it's the government's job to invest in the 80% of us that need practical ways to grow our own wealth (smart energy policy, infrastructure development, education).
Where was FDR when we needed him 28 years ago, when this Milton Friedmanesque, neo-conservative insanity began?
Get some knowledge of economics and get over your class envy.
People who refuse to ever save a nickel, buy ipods and big screen TVs financed at 25% rates, and otherwise spend every penny before it is earned will neever own anything. Taking money from the savers to give to the spenders will accomplish nothing.
The author offers good advice. Go out and buy one or two rental properties. Financing is still pretty cheap and available if you have something down. Rent, hold and let the calendar do the heavy lifting. makes a little money and offers long term inflation protection. You might not like it, it requires a little effort to get the benefits.
BSV is mostly a Treasury / Agency bond fund and
mostly NOT corporate bond fund.
https://personal.vangu...
A better short term corporate bond fund is Vanguard Short-Term Investment-Grade (VFSTX).
https://personal.vangu...
A word of caution here is that VFSTX is NON-DIVERSIFIED.
Their biased definition of "Investment Grade" means Banks and Insurance Companies.
So, be careful.
Related funds are VFICX and VWESX, Intermediate & Long Term.
Thankfully, I got out of the Florida market in 2005, pocketing my share of the speculation, so I don't need any economics lectures.
If both of you would take a sobering look at what this economic direction for the past 28 years has left us, you might reach different conclusions about the future, but that might be difficult when one only tunes into CNBC and FOX News.
Some fools need to buy up the remaining glut for the real estate market to begin its turn, so if you define long-term holding and oh, 15-20 years, then I applaud your bravado. With people walking away from mortgages and thousands more unable to sell, the existing housing stock will more than settle the rental needs.
Buy away, and in the next five years watch both values and rental retreat do its inevitable number on each of you. Just desserts for those sitting at the Republicans' table.
Don't really care where you are sitting, but when you post dribble filled with political diatribe and call that constructive, don't expect that you won't receive a little constructive crticism back.
Still say that looking for dividend stocks and taking a gambit on a falling real estate knife does no service to your readers. Your right-leaning predilections does even less service to your credibility.