Navigating the stock market will always be difficult. Additionally, the current economy has presented us with new challenges. The great depression was the last time we’ve seen so much debt in the economy, especially among households. It is also important to note that it was almost a generation before this debt was paid off to the extent that consumers could spend enough for the economy to grow consistently.
Today we are not in a depression, but we still need to reduce consumer debt before the economy can get back to a healthy annual growth rate. With this in mind, investors should proceed differently than they did in the 80s and 90s when the economy was growing and the stock market was thriving. Many economists predict that stock markets in established nations will not recover for several years. Therefore we believe investors should consider adjusting their portfolios and lessen holdings in the U.S. and other established nations growth stocks, to income-producing securities, and non-traded securities where appropriate.
The main investing question we receive is “Where do I invest my money?.” Here are some of our suggestions, depending on appropriateness, that can help balance your portfolio and mitigate risk:
We think it’s quite likely that high-income vehicles will out-perform stocks over the next 5+ years. “Flow-through” investments are not taxed at a corporate level – so the income “flows through” to the investors creating more income then through traditional stocks and bonds. As of early 2016, many of these securities are at or near all-time lows.
Real estate is another asset class that should be incorporated to balance portfolios and it could be the best sector for growth in the United States. The problem with publicly-traded real estate in the U.S. however, is the amount of legacy assets purchased by publicly traded securities. These assets were bought at high debt levels and high prices before the 2008 correction. Dividends were slashed, and recovery was slow. Rather than the older, large-cap REITs that make up most public Real Estate funds, we prefer smaller public reits which can have greater growth potential and often have higher dividends. When appropriate, we also help our clients to invest in non-traded issues which buy at low prices with little or no debt problems. These pay a tax-advantaged dividend and have growth potential as well.
This is for informational purposes and is not an offer to sell or a solicitation of an offer to buy any securities and may not be relied upon in connection with the purchase or sale of any security. Data quoted represents past performance, and is no guarantee of future results.
Copyright © 2016, Creative Wealth Advisors, LLC. All rights reserved.