With most Western economies facing financial downturns, if not all out recession, it is becoming significantly hard for investors to find good investments offering solid results. The recent global credit problems has managed to get much more expensive for companies to borrow funds to fund their activities. Virtually every detailed company uses some for of debts to fund part of their trading activities and therefore there are practically no companies out there which have been unaffected by this crisis. This increased expense of borrowing has compelled profits lower and for some highly leveraged companies it has spelled the end, just as it did for Bear Stearns.
All of this has supposed that stock prices have been dropping and with the economic climate established to worsen traditional equity stocks look set to reduce investors’ money. Traditionally in recessions traders were well recommended to move funds into what exactly are known as ‘staple industries’ such as food sectors, the theory being most of us need to consume and buy their goods.
However the impact of increased borrowing costs as well as rising commodities prices has meant that food prices are getting more costly and hitting underneath lines of food industry companies. In order to better recession evidence your investments it is essential to learn to not be afraid of buying new marketplaces or industries.
Many investors make the error of thinking they can only succeed by sticking with investing in their specialized niche. This works when marketplaces are rising however when they are falling it can be compared to attempting to choose good apples out of the rotting basket. Instead choose a new fresh container in which to make investments.
There are many many ways to generate income if you have money and that’s a good thing. The reason why this section is separated out is you should be willing to lose some money if things go south. That is called “higher-risk return” aggressive income versus “without risk” aggressive income. There can be an important difference because the return profile is higher and you also shouldn’t bank or investment company on 100% of it being stable every single calendar year. Owning Properties, REITs, and Private Equity Real Estate: Now the difference here is you’re handing over the secrets.
- These properties are then leased out to tenants
- Does it have a well balanced cash stream
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Unlike the management income where you do it yourself you’re going to outsource everything. You toss money at the house and hand the secrets to someone else to cope with it. We peg a good return at around 6-9%. This includes a management company eating into your yield and undoubtedly the natural reserve account for just about any maintenance issues.
The second item is a REIT which certainly has risk associated to it. ‘re taxed based on your individual income bracket vs. ‘s a collateral product so that as a shareholder, we must realize they can only re-invest 10% of net gain since the rest has been distributed. Have a look at REITs and you’ll see they move around in ways un-related to the currency markets.
The third option is working through a private equity firm such as a Blackstone, Lone Star or Brookfield. You’re locking up your cash for an extended time period (typically) however, the returns should be notably higher as well (double digits). Now there is certainly a wide range of private equity transactions from low to extremely high risk… But. Locking the money up for longer periods of time is the theme here generally. Unless you’re in the Ultra-Rich group, it’s one of your very best bets to get exposure to commercial real estate (apartment buildings, offices etc.).
Overall, we’d say if you viewed this group in aggregate firing for high solitary digit to low dual digit results is doable with the right history research. Many people make a good-looking living in the real property industry (there are even professionals who read this website and have emailed us!) and there’s a clear reason for it. High Yield Bonds: If you know your industry extremely well, you can begin dabbling into higher-risk bonds. We wouldn’t recommend entering the low end of the junk bond territory unless you’re extremely savvy nevertheless, you can begin looking at items with a yield closer to the BB range.