Why Real Assets Will Soar In The Recovery

Summary

• Your asset allocation decision will have a major impact on your performance in the recovery.
• We believe that this low growth, low interest rate environment favors resilient, high cash flowing real asset investments.
• Finally, we present two real asset investments that we currently hold in our Core Portfolio.
• Looking for a portfolio of ideas like this one? Members of High Yield Landlord get exclusive access to our model portfolio. Get started today »

Most investors invest the majority of their capital into regular stocks and bonds.

I prefer to invest most of my capital into real assets investments, which include REITs, MLPs, YieldCos, and other Infrastructure companies.

And in this article, I will outline why I expect real assets to soar in the recovery and outperform regular stocks and bonds.

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Without further ado, here are the 5 main reasons why you should consider a large allocation to real assets today:

Reason #1 – Defensive Cash Flow for a Slow Recovery

It appears increasingly likely to us that the economic recovery will be long and slow. As we explain in a recent Market Update at High Yield Landlord:

Three issues will prevent a quick snapback in the economy and will instead cause the recovery to be slow and halting for a long time to come:

• The coronavirus itself, which is killing people (i.e. workers and consumers), reducing (or reducing the efficiency of) work hours, and diverting resources away from productive purposes.
• Government responses to the coronavirus pandemic, which, whether beneficial on net or not, have undoubtedly had a dampening effect on the economy by restricting business operations.
• The major increase in national debt incurred because of the crisis.

The Fed itself does not expect a full recovery for quite some time and this is also why interest rates are expected to stay at near 0% for years to come.

You just cannot have it all: a full recovery and strong covid safety measures. It is one or the other:

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With the economic recovery taking much longer than previously thought, investors should position their portfolio for slower growth by focusing on investments that enjoy:

• Long contractual cash flow
• An essential nature
• A high cash flow yield

And that’s exactly what real

Analyst’s Disclosure:I am/we are long NNN; HTA; O; IRT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.