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Preferred shares can offer enticing high-single-digit yields, but they can create a misleading sense of safety. I detail some of the biggest potential traps that retirees often fall into. I also share some of my top preferred picks of the moment.
Income investors, who apply a buy-and-hold strategy, inevitably run into the problem of divergent yield on cost vs. actual portfolio yield. If the idea is to never sell and the portfolio has appreciated, then the key issue is that each reinvestment dollar generates less and less incremental income. Target yield instrument can be used to solve this issue.
I have high conviction in real assets right now. I detail why I believe that quality real asset investments will be worth materially more over time. I also share two of my highest conviction real asset investments of the moment.
Vanguard Real Estate ETF offers a significantly lower expense ratio of 0.13% compared to 0.50% for State Street SPDR Dow Jones Global Real Estate ETF. State Street SPDR Dow Jones Global Real Estate ETF provides global exposure to 244 holdings while Vanguard Real Estate ETF concentrates 97% of its portfolio in U.S. real estate.
Manufactured housing REITs remain highly attractive. High yield can hide higher risk. Quality, balance sheet, and valuation matter most.
Vanguard Real Estate ETF offers a significantly lower expense ratio and higher liquidity than FlexShares Global Quality Real Estate Index Fund. FlexShares Global Quality Real Estate Index Fund provides global diversification and a higher trailing dividend yield compared to the domestic focus of the Vanguard fund.
Most REITs rallied, but rare bargains still dipped. Major transformations are creating overlooked upside. 5%+ yields offer income while waiting for recovery.
The Vanguard Real Estate ETF (NYSEARCA:VNQ) has quietly delivered a 12% year-to-date total return through mid-July, but the rally has stalled.