Lately the stock market has felt like a casino.
You’ve seen that with the chaotic rise and collapse in stocks such as GameStop (NYSE: GME) and AMC Entertainment (NYSE: AMC). It’s a jackpot one moment, then a bust the next.
Greed and the “get rich quick” mentality are driving investors to madness, which makes it easy to forget about the market’s incredible wealth-building opportunities for longer-term investors.
Investing offers a path to financial freedom, but you have to do it right.
It’s OK to swing for the fences with money you can afford to lose. But you should take profits along the way as Ted and I showed you here.
As you take profits, use those gains to build a portfolio that can sustain your financial well-being for the long term. You do that by generating a steady stream of income from your assets.
Take Advantage of Crisis
Winston Churchill once said, “never let a good crisis go to waste” as the Second World War came to an end. That’s just as true in the stock market. For example, in July last year, The Bauman Letter spotted an opportunity to scoop up shares in a high-quality dividend payer trading at a steep discount. Investor panic from the pandemic became our profits.
Not only has the stock rebounded nicely, but we also captured a yield on cost (which Ted talked about yesterday) that generates 325% more income than what you can get on the S&P 500 Index today.
Now with the sharp rebound in the stock market, you may think that you’ve missed your chance at a similar payday.
But there are still terrific opportunities to buy discounted stocks that will deliver an exceptional level of dividends.
You just have to know where to look for them.
Create a Lifelong Income Stream
Despite recent record highs for the S&P 500 Index, there are industries across the stock market that remain well below their pre-pandemic levels.
Plus, many of those sectors enable you to lock in a high yield on cost. Real estate investment trusts (REITs) are a prime example. These investment vehicles own various types of real estate and other assets, and must distribute almost all of their earnings as dividends.
Take a look at the Vanguard Real Estate ETF (NYSE: VNQ) below. It has only recovered about 70% of its decline following the pandemic. That’s because there’s still too much investor skepticism around many REITs, especially those owning retail and entertainment properties.
But right now, you can grab a 3.9% yield with VNQ. That’s more than three times higher than what you’d get with a 10-year Treasury bond and more than twice the yield of the S&P 500.
There are even better opportunities with individual REITs and other high-income securities, which serve as the cornerstone of the Endless Income model sub-portfolio in The Bauman Letter.
In the meantime, do yourself a favor: Don’t spend too much time in the casino. You will only achieve true financial freedom when your assets provide you with a lifetime of income.
Research Analyst, The Bauman Letter