Displaying items by tag: income

Real estate took one of the hardest hits in any submarket due to rising interest rates but as certainty starts to look a little clearer REITs pose to make a comeback.  Several real estate investment trusts (REITs) recently received analyst upgrades, indicating substantial potential upside.

Equity Residential, which owns numerous apartment communities, was upgraded by Piper Sandler from Neutral to Overweight with a new price target of $80. Acadia Realty Trust was upgraded by JP Morgan from Underweight to Neutral, with a price target of $18. Finally, Americold Realty Trust Inc., specializing in temperature-controlled storage, saw upgrades from both Barclays and Scotiabank, with price targets set at $26 and $30, respectively. Digital Realty Trust (NYSE

 Despite various market conditions, these REITs show promising growth prospects according to recent analyst evaluations. 

Finsum: Investors can also look to yield as an important factor and get income exposure through REITs. 

Since 2012, high-yield income stocks and ETFs have declined in value as rising interest rates have made bonds, Treasury bills, and CDs more attractive. However, buying high-yield ETFs now could be advantageous if interest rates decline in the future. Notable high-yield options include the JPMorgan Equity Premium Income ETF (NYSE: JEPI) and the JPMorgan Nasdaq Equity Premium Income ETF (NASDAQ: JEPQ). Both ETFs use equity-linked notes (ELNs) tied to covered calls and have low expense ratios of 0.35%.

JEPI comprises 130 equities and routinely writes monthly calls on the S&P 500, yielding 7.5% annually. In contrast, JEPQ includes 98 equities and writes monthly calls on the Nasdaq-100, yielding 10.9% annually due to the Nasdaq 100’s higher volatility.

 Both ETFs offer steady monthly payments that are higher and less volatile than those from other dividend-focused ETFs, despite limited gains in strong markets due to their covered call strategies.

Finsum: As interest rates fall underlying bond prices could help boost the performance of these funds. 

While you’ll find salespeople peddling the pros of annuities littered across the industry and their detractors in equal force, but in reality, index annuities, under specific circumstances, can be a viable option for a steady retirement income. Here are three top providers:

• MassMutual stands out as the top annuity provider with high ratings and a broad range of annuity types, making it a reliable choice for straightforward annuity products.

• Athene, known for its no-charge income and death benefit riders, offers a variety of annuities, including fixed and index-based options, suitable for those seeking guaranteed retirement income. 

• Fidelity Investments, partnering with several insurance companies, provides a wide range of annuities and offers the Fidelity Personal Retirement Annuity, notable for its low fees and no surrender charges. 

Each of these companies caters to different investor needs, from those desiring straightforward solutions to those looking for comprehensive investment and annuity integration.

Finsum: Index annuities in particular can be a goldilocks solution to income investments during higher volatility. 

Traditionally, fixed income is where financial advisors look to reduce portfolio risk. This is no longer the case in the post-pandemic period, as the bond market has experienced major volatility, which is becoming the norm in a high-rate, high-inflation regime.

Given these conditions, investors may be better off with fixed index annuities (FIAs). Like bonds, FIAs produce income; however, a key difference is that FIAs guarantee an income stream for life as opposed to a fixed period. Another advantage of FIAs is that they have higher earnings potential than bonds, given that many are designed to earn interest based on the performance of an external index like the S&P 500. In contrast, fixed income has significantly underperformed over the last 5 years and failed to beat inflation.

Over long periods of time, costs matter when it comes to long-term investing. Most bond investments have fees that range between 0.5% and 2%. In contrast, FIAs tend to have much lower fees, on average. 

In terms of risk, FIA offers full protection of the principal investment. This means that it can be more effective than fixed income to hedge equities, especially in the current environment. Overall, FIAs can be more effective than fixed income, especially for investors who are in or nearing retirement. 

Finsum: Advisors should consider fixed indexed annuities (FIAs) as an alternative to fixed income, especially in the current environment. FIAs offer lower costs, more downside protection, and greater potential for appreciation.

According to Lindsay Rosner, the managing director of multi-sector fixed income investments at Goldman Sachs, fixed income is presenting investors with an attractive opportunity to lock in high yields without compromising on quality. There are some challenges given divergences in central bank policy around the world and increasing uncertainty about the timing and direction of the Fed’s next move. Overall, the firm believes that the status quo of ‘higher for longer’ is likely to prevail.

A major factor is inflation, and the economy proving to be more resilient than expected. As a result, the market is now expecting two quarter-point rate cuts before the end of the year, compared to expectations of 150 basis points in cuts entering the year. The next Fed decision is on July 29. Prior to that meeting, there will be considerable amounts of inflation and labor market data, which could impact its thinking, although the current expectation is for it to hold rates steady.

With rates at these levels, there is increased risk that consumer spending is affected or that a higher cost of capital begins to impact corporate profitability and hiring. This risk increases the attractiveness of fixed income, especially as many investors are looking to rebalance given strong equity performance. Rosner sees opportunity in higher-quality areas such as investment-grade corporate bonds and structured products with AAA or AA ratings, especially given an impressive carry differential over Treasuries.

Finsum: Goldman Sachs sees opportunity in higher-quality segments of the fixed-income market. It believes investors should lock in yields at these levels, given the risk that high rates will eventually sour the economic outlook.