My Two Best Alternatives to Stocks (NOT BONDS)
Rising interest rates are killing the bond market. Alternative investments are a must to grow real wealth.
Below I give you my two hands-down favorites.
Grab These Alternative Investments Quick
I hate to say I told you so, but…
I’ve been warning all year about the fact that interest rates are headed a lot higher from here, and inflation too.
Now I’ve got some company in this prediction.
Jamie Dimon, CEO of JPMorgan, has come over to my view, warning recently that the 10-year Treasury bond could soon spike much higher, increasing by two-thirds more than today’s 3% yield.
“I think rates should be 4% today. You better be prepared to deal with rates 5% or higher — it’s a higher probability than most people think,” warned Dimon, as reported by CNBC.
Stimulus Versus the Fed
The reason that Dimon expects interest rates to rise is a very strong economy. The unemployment rate is below 4%, GDP grew at a 4.1% annual rate in the second quarter and a tsunami of government stimulus came in the form of the Trump tax cuts and a fiscal spending spree.
Moreover, business and consumer sentiment are extremely strong.
”Business sentiment is almost at the highest level it’s ever been, consumer sentiment is at its highest levels… If you look at how the table’s set, consumers are in very good shape,” says Dimon.
His boldest prediction of all? The current bull market could “actually go for two or three more years.”
Here again Jamie Dimon and I agree. Although the path to 5% T-note yields — up 66% from today’s level — could be a rough ride for the stock market to stomach.
One thing is certain: The wrong way to invest for income today is with long-term bonds.
The Simple Way to Do It
The right way to invest for income is with dividend-paying stocks and other bondlike equity investments, including REITs and MLPs.
The easiest way to invest in REITs is through mutual funds or, better yet, ETFs like the Vanguard REIT Index ETF (VNQ).
However, index investing only gets you average yields, in this case a not-too-shabby 3.5%.
Among individual REITs you can earn much higher yields. Consider NYSE-listed Ventas (VTR), which owns and operates health care facilities in the U.S. with an indicated yield near 6%.
Another subsegment of this sector are REITs that invest in commercial and residential mortgages. One ETF in this space that looks really attractive is iShares Mortgage REITs ETF (REM), which pays you a juicy yield of 11%!
Here’s to growing your wealth,
Chief Income Expert, Mike Burnick’s Wealth Watch
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