5 Assets You Need to Own (Not Bitcoin)

Welcome to Jeff’s School of Retirement Planning!

Years ago… I’m gonna say around 2007… an email landed in my inbox from someone inside the Indiana Pacers’ front office. He wanted some advice… and we ended up on the phone together…

See, the Pacers, a team in the National Basketball Association, had purchased a bunch of copies of my book, The Wall Street Journal Guide to Personal Finance, and handed them out to players.

Pro athletes, often fresh out of college and coming from difficult financial situations, too frequently mismanage their money. That’s because, well, they suddenly have more money than they’ve ever seen and they just assume the gravy train will ride forever… So, they spend spend spend; throw too much money at family and friends who call to say they want to buy this, that, and the other thing… They invest with charlatans who promise the moon, yet all along the way are stealing all that they can from the athlete’s account…

The Pacers wanted to give their young hoopsters some basic knowledge on money, personal finance, investing, and saving for retirement.

But then the guy on the Indianapolis end of the phone asked a personal question: “I have some money squirreled away but I know it’s not really invested right—it’s all in CDs and savings. Can you just tell me the kinds of assets I should be looking at?”

I hear some version of that question from time to time when I’m speaking at International Living conferences, or even just talking to friends. No one who isn’t an investment geek really knows how to design a portfolio, or how to pick the asset classes and the right investment in each class.

Can’t blame ‘em.

I mean, it’s not like schools or universities teach those skills to anyone other than students enrolled in a financial-planning or investment-management program.

So, let me say: Welcome to El Jefe’s School of Retirement Income Planning!

To be clear, what I’m about to share isn’t a lesson on how to structure a holistic portfolio, which should include stocks, bonds, cash, other currencies, gold, income-producing real estate, and alternative assets such as bitcoin.

Instead, this is just one part of that program—the part where I focus on where to find retirement income. That is very often the biggest issue that people struggle with. Everyone wants income in their nest egg, but few really know where to find it besides basic S&P 500 stocks and maybe real estate investment trusts.

So many other options exist.

Which is what I want to share with you today—the income-rich asset classes I include in my upcoming Retirement Income Masterclass, and why I include them…

1. Dividend Stocks

This is a pretty obvious asset class, of course. But not everyone heads into it the right way.

Some people screen for the highest yields they can find among companies they know, but that’s often fraught with much too much risk. High yields for a company not known for high yields is often a sign of a dividend trap—a stock that looks enticing because of the meaty dividend stream, but which is suffering operationally and will likely be forced to cut or eliminate that dividend in the future.

Other investors simply accept that they’ll only get 1% to 3% yield in some blue-chip name and accept that as their “big” income stream.

Truth is, traditional stocks are packed with exceptionally strong companies, that pay out as much as 8.5%, and that are growing both their business and their dividend payments. And as I showed in my dispatch yesterday, rising dividends are the fuel that propels stock prices higher.

2. Real Estate Investment Trusts (REITs)

I imagine most investors know about REITs—the stock-market asset that, by law, must give out 90% of its income as a distribution to shareholders.

Too many investors, however, focus their efforts on a slim segment of the REIT market, namely those that manage apartments, retail centers, medical offices, and commercial space. The focus is often so great that those REITs dish up paltry yields of 2% or less, simply because everyone buys them.

But the REIT market is far broader and includes companies that focus on operations running supermarkets and storage facilities and whatnot. And their yields are very often 6.5% to 8% or more.

3. Master Limited Partnerships (MLPs)

This is a fairly narrow niche, and is typically populated by lots of companies running pipelines all across America. (We have a pipeline MLP inside my Global Intelligence portfolio and it’s up nearly 40% and has kicked off $4 worth of dividends per share in the two years that’ve owned this $25 stock.)

However, energy isn’t the only industry active in the MLP space.

Go searching, and you can find industrial conglomerates, fertilizer companies, asset managers, and others.

And because they’re MLPs, they distribute almost all of the income to shareholders. The benefit there is that profits aren’t taxed twice as they are with a traditional company, where corporate profits are taxed and then so too are dividends distributed to shareholders.

The MLP setup means that only shareholders pay taxes on the profits. So, always check with a tax pro about your specific situation.

4. Canadian Income Trusts

Not a lot of Americans have heard of these because they don’t often appear in the traditional financial press.

In essence, they are something of a love-child between MLPs and REITs. They must distribute the bulk of their income to shareholders, who are the ones responsible for paying taxes.

Canadian trusts run the gamut of industries, from real estate to energy to fast food. And many of them pay out their plump dividend stream monthly instead of quarterly, which can be a great way to spread income out over the year instead of waiting for quarterly chunks here and there.

Not all of these trusts trade in America, but many of them do, often on the over-the-counter market under five-letter symbols that typically end in “F,” the denotation that this is a foreign share that has been listed in the US.

Yields here are often in the 6% to 10% range.

5. Baby Bonds and Preferred Stocks

While many investors will recognize the term “preferred stocks,” not all will be familiar with “baby bonds.”

In practical terms, both asset classes are very similar.

Preferreds are pieces of a company’s equity that carry a fixed dividend payment in exchange for no voting rights on company matters. And they exist in the financial hierarchy ahead of common stock, meaning their dividends are paid first.

Baby bonds are debt instruments but they trade like shares of stock. They’re often priced at—and fluctuate around—the $25 and $50 range, and they pay out a fixed interest payment on a regular schedule. Because of their price, they’re way more affordable than traditional bonds, which are typically priced at a $1,000 minimum and which often require you buy at least 10 at a time.

Because baby bonds and preferreds are fixed-income, you’d think they don’t have much price appreciation to them. But if you find the right one at the right price, you can see surprisingly decent capital gains.

In my previous Retirement Income Masterclass I offered my readers last February, I recommended several baby bonds and preferreds that have now returned between 12% and 26%—before accounting for income yields of between 6.1% and 9.3% annually.

So… that’s where’d I’d tell you to be looking to lock in plump yields these days.

Or just tune in to my Masterclass next month and I’ll give you my fully up-to-date list of passive retirement income opportunities—click here for all the details.

You don’t need to be a professional athlete to attend!