Inflation is a portfolio killer for fixed income investors. And in 2022, with surging prices on gas and electricity and food, many folks are feeling the pain.
According to the latest data, price inflation in the U.S. hit another four-decade high in February as prices surged 7.9% compared with the prior year. And since that’s February data, before global Russian sanctions came down hard and disrupted commodity markets further, that’s a very bleak sign indeed.
What’s more, once-loved dividend darlings like Energizer Holdings (ENR), Clorox (CLX) and Ford (F) are all down 20% or more so far this year – while long-term bond funds like the iShares 20+ Year Treasury Bond ETF (TLT) are down 10% or more since Jan. 1.
It’s enough to make even the most experienced investor panic.
But in times like these, it’s important to remember that “mainstream” investments are not the only options you have.
You have other choices.
And at times like this, the choices you make can be the difference between meeting your investing goals or falling permanently behind.
A Contrarian REIT Play to Defeat Inflation
Being a “contrarian” means resisting popular opinion. It means looking beyond the standard set of stocks and bonds, and looking to investments that perform fundamentally differently.
And that’s exactly the kind of trade you’ll find in my favorite REIT investment right now.
For starters, it’s global in nature. When most investors are taking cover amid geopolitical unrest, this pick is focused on overseas opportunities – not in war-torn Eastern Europe or risky emerging markets, of course, but stable and developed markets like Germany and Japan that have held up quite well.
Secondly, it blows away the typical yield you’ll find in traditional blue chip dividend stocks right now with a yield that is 6.8% at current pricing. That’s roughly five times the typical S&P 500 stock!
And lastly, it has shown unrivaled resilience as U.S. markets have been volatile. In fact, after a recent snap-back the charts show it has good upside momentum and may be on the cusp of a breakout in the weeks ahead.
I won’t keep you in suspense any longer like some financial analysts do … This pick is the Vanguard Global ex-US Real Estate ETF (VNQI) – and here’s why I like it.
VNQI – The 6.8% REIT Investment You’ve Never Heard Of
With $5 billion in assets, VNQI may be a very large fund, but is hardly a tiny or niche play. This is a well-established exchange-traded product from investment giant Vanguard… but it has been overlooked by many investors despite its huge yield and very diversified approach to global real estate.
The yield on this fund is a juicy 6.8% based on the last 12 months of distributions. But don’t fret, there’s no messing around with strange tax forms or foreign-language reports to read.
What’s more, this real estate fund is diversified across nearly 700 different individual holdings — including stocks you may not have access to in your standard investment account. These include Tokyo-based high-rise operator Mitsui Fudosan and German apartment complex giant Vonovia, as two prominent examples.
Perhaps unsurprisingly, this real estate fund took a hit amid rising tensions between Russia and Ukraine in February. But that has created a big-time buying opportunity right now. Shares bottomed in early March and have snapped back in recent weeks to hint that early negativity was an overreaction.
In fact, after a recent rally on high trading volume this investment just broke through its 50-day moving average this week.
That’s a common indication that the downward trend is over, and investors should have confidence buying in after recent upside moves.
Sure, this is not your typical dividend stock… It’s better!
With a diversified portfolio of real estate holdings in a single ticker and a yield that is 5X your typical blue chip, why would you settle for anything less?
Don’t settle for less than 7% yield
Foreign real estate probably isn’t the first place that most people look for income right now. And that’s OK… because it means inefficiencies that contrarian investors like you and me can exploit!
There’s simply no reason to struggle along with yields of just 2% or 3%. Especially not when inflation is running at twice that rate and eroding your buying power day after day.
In the current environment, however, even VNQI’s generous payout barely cuts it.
The truth is you should NEVER settle for less than 7% yields… As thanks to the research of my colleague, retirement income specialist Brett Owens, you don’t have to!
His approach is simple: Build a portfolio that offers a MINIMUM of 7% yield, and then just put your savings to work in a low-stress “no withdrawal” strategy that pays you like clockwork:
You’ve already done the hard work of saving. But even if you have $1 million in the bank, the current yield on the S&P 500 generates a measly $14,000 a year. How the heck are you supposed to live on that?
The answer is, you can’t. You have to keep dipping into your nest egg simply to pay the bills.
The “no withdrawal” portfolio, on the other hand, generates a comfortable $70,000 a year for Brett’s investors instead.
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