REITs
If and when interest rates rise, it’s good to own Real Estate Investment Trusts (REITs) with relatively low debt and low floating-rate debt. REITs are companies that own or finance income-producing real estate, not bargain-bin real estate with limited demand. They’re modeled like mutual funds, and could provide you with a number of different income streams. REITs are expected to grow even if the interest rate rises, and will typically pay out all of their taxable income as dividends to shareholders. In turn, shareholders pay the income taxes on those dividends. Click the video to the left (or here) to learn more about REITs!
BDCs
Traditional fixed-income holdings, like bond funds, may not provide enough meaningful income for serious investors. Additionally, low interest rates often have limited yields. Also, continual market volatility has contributed to significant swings in the performance of many portfolios’ fixed-income assets. This has motivated investors to explore more stable, potentially more lucrative investment strategies.
Business Development Companies (BDCs) are pooled investment funds. They’re like mutual funds in that they hold a portfolio of assets, but instead of investing mainly in publicly traded equities or other securities of public companies, they invest in the debt and/or equity of private U.S. companies. Although this investment strategy is known or understood by relatively few investors, they have historically generated a higher dividend (6-9%) than many other traditional fixed-income investments. Click the video to the left (or here) to learn more about BDCs!