Remove Volatility From This Income Play
Dear Reader,How many times have we been told that a diversified portfolio will protect us?
Wall Street and its peddlers are constantly recommending a mixed portfolio, diversification, and to never go all-in on any one investment. This is sort of good advice, but the problem is that the solution from your broker is to put everything into the public markets, exposing your liquid wealth and stomach to extreme volatility.
The fact is volume is what moves prices, and if a market crash is occurring, it doesn’t matter what sector you are in, you’re going to see selling pressure across everything.
For the past 10 years, the Federal Reserve has done an excellent job at forcing savers and income (prudent) investors into the volatility of the public markets. In reality, public companies should just be part of your overall diversification, not the end-all to diversify an investment portfolio.
Here is exactly what I own to provide my household with multiple streams of income:
- Single-family rentals
- Peer-to-peer lending
- First trust deeds
- Commercial and multi-unit rental property
- Both actively- and passively-managed businesses
- Whole life insurance
- Dividend-paying stocks
- Occasional house flipping (when it’s so severe that my realtors have no one else to call but me)
- Publicly-traded real estate investment trusts (REITs)
- Corporate bonds (today, I own zero)
Over the course of my life, I hope to add dozens of businesses. Seeing entrepreneurs I can partner with and helping them succeed is one of the most fruitful acts I’ve ever experienced.The most important lessen I’ve learned is that for the most part, my best income-producing assets have almost always been outside of Wall Street.
This leads me to our new income idea. It’s something I’ve been following for over a year now, but only recently pulled the trigger on. It delivers a 7% yield, is led by some of the top people in its industry, and may be a new income idea that can help many of our members compound their wealth without any volatility.
Before I go any further, we should all appreciate that the reason the stock market has those ups and downs, and extreme volatility sometimes, is because it is liquid.
This means that at any time, at the click of a mouse, we can sell our shares for the going market price. Today, if you own a public REIT with a great company, like Vanguard, you’re yielding about a 5% return. Over the last year, you’ve seen this publicly-traded REIT index trade anywhere from $30.79 down to $23.76, certainly something that can play with your emotions.
That’s the downside of liquidity: it’s a real price drop, and it will absolutely play head games with your emotions. This new investment I have made is in a private real estate investment trust (REIT).
It still files with the SEC, and you even receive share certificates. However, it’s not as liquid as a public company – not even close. There is no day-to-day price; in fact, the shares are valued by a 3rd-party company for a monthly share redemption program for investors who do need to sell.
If you choose to invest in this private REIT, plan on a 3- to 5-year time horizon, and do it purely for income. The private REIT company we recommend is Rich Uncles NNN Real Estate Investment Trust.
Now, I’ll be the first to admit that I despise the name. It’s so awful that I avoided even looking into for months, and even after I decided it looked like a good investment, I continued my hesitation due to it having “Rich Uncles” in its name.
The name itself has a backstory that you can read about at their website. For now, let’s just ignore it and look at what they’ve built and who is behind the company.
The founders have incredible resumes. One that is specifically noteworthy is Ray Wirta. Ray Wirta is the former Chairman of the CBRE Group (NYSE: CBG), a $10 billion market cap company that is an S&P 500 stock. He’s a founding investor, and with his leadership, he certainly separates this company from other crowdfunded real estate platforms.
The platform and website is very user-friendly. This is a truly passive income idea, and you do not need to be an accredited investor.
With a 50% equity stake in each property the REIT owns and high-quality tenants, I feel that this could be a real winner for investors seeking cash flow. And the company is only entitled to profits after the REIT delivers a 7% yield to its investors.
Our Recommendation: Consider purchasing shares of Rich Uncles NNN REIT, Inc. in 2017.
This is currently an open-ended fund.