One of the best ways to build wealth is to invest in a diverse, long-term portfolio. The goal, of course, is to capitalize on compound interest, and to reap the benefits of stocks that are set to see steady growth in the future. While investing in large cap funds may yield consistent annual returns, it is wise to invest in stocks that pay healthy dividends.
What are dividends? They are essentially a consistent income stream that companies pay to their shareholders. Generally, the more profitable they are, the higher the dividend payout may be. Whether dividends get paid once per quarter or once per year, the benefit cannot be ignored.
To Build Wealth, Diversify With Dividend Paying Stocks & Funds
Can you imagine what might happen if you had a lot of different stocks paying you dividends regularly? Well, you could build wealth fairly quickly. Not all dividend-paying stocks and funds are created equal though. Some pay more and some pay less.
We’ve discussed various ways to invest in real estate before, and we can’t stop talking about REITs: Reits are a great way to invest in real estate without having to purchase, sell, maintain, or rent any physical properties yourself. Since REITs can be purchased and sold just like any other stock, all you really need is the capital to buy at least 1 share.
What are mREITs?
Mortgage REITS, or “mREITS” for short, are mortgage paying companies. When you take out a mortgage from a bank, the bank sells the mortgage to these companies. Unlike their traditional REIT cousins, mREITs don’t rely on rent payments or property sales to make their profits; rather, mREITs profit from the interest that homeowners pay on their mortgage loans.
Why Consider mREITs Now?
Even though many homeowners defaulted on their mortgage payments this year, the housing market is starting to boom. Despite nation-wide job losses, people are buying houses. With this in mind, it may make sense to prioritize mREITs that focus on residential properties. While you can’t necessarily go wrong with this approach, we don’t recommend counting commercial-focused mREITS out entirely.
Even though many companies have traded their office keys in for remote work stations, there is still a need for commercial properties in the world. In addition, thanks to COVID pressure, commercial mREITs are trading at much better valuations than they have in years. According to Credit Suisse, commercial REITs are trading at an average yield of 10.5% versus a historical average of 9%. That’s quite a bump!