Seasoned investors have been through it many times before, but watching the value of a stock portfolio diminish after it’s grown so nicely over the past couple of years is not easy.
The good news is that the market has always recovered from every downturn and maintained positive average annual returns over time. However, it’s this part of the market cycle that trips a lot of investors up as the speculation begins as to when we’ve hit the bottom.
Hoarding cash to wait for the best time to buy may sound good in theory, but it doesn’t work in practice for most investors. Instead, finding investments that provide passive income, regardless of how the market is performing, can greatly increase the chances of realizing positive cash returns while avoiding the stress of trying to speculate on what the market will do tomorrow.
Dividend stocks and bonds may have been the go-to solution in the past for adding some cash returns to a portfolio, but very few of those can come close to keeping up with inflation. Many investors are now turning to high-yield alternative investments that provide attractive cash distributions and have little correlation to the stock market. Here are three options to consider:
Real Estate Equity
Real estate is a tried-and-true investment vehicle that provides consistent cash flow through rental income. Traditionally, investors that didn’t want to take on the expense and headache that comes with buying and managing income-producing real estate would have to either invest in a private equity real estate fund, with a six to seven-figure minimum investment, or publicly traded REITs, which are far from immune to stock market volatility.
There are now multiple real estate investment platforms that allow individuals to make equity investments in a wide variety of offerings. Investors can buy shares of individual rental properties, invest in large-scale commercial developments and just about everything in between.
Real Estate Debt
Several investment firms, developers and lenders are turning to individual investors to fund real estate-backed loans. Passive investors can receive consistent and predictable returns as payments are made over the term of the loan.
Several alternative investment platforms have options for investing in real estate-backed debt. These are often short-term loans with a higher interest rate than loans made by traditional lenders. Investors earn predictable returns with limited risk since the loans are backed by real assets.
Non-Traded Real Estate Investment Trusts (REITs)
REITs are well known for their high dividend yields, but non-traded REITs have the bonus of low correlation to the stock market. While share prices in a publicly traded REIT fluctuate with the stock market, shares in non-traded REITs are priced based on the net asset value (NAV) of the portfolio.
The main drawback to non-traded REITs is the limited liquidity options. Since shares aren’t traded on a public stock exchange, investors can’t simply sell their shares whenever they want to cash out. Most non-traded REITs have a minimum hold period of one year, with full liquidity available after three to five years.
Find all the best real estate investment offerings in one place on Benzinga’s Alternative Investment Hub.
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