Making Money Alert
Income Investing Has Never Been Better
07/11/2007
Three year ago, I started a new service called High Monthly Income. Since that service began, I have immersed myself in researching income investing opportunities designed to help my subscribers to generate high income without high risk.
You already have seen a number of my recommended income-producing investment vehicles profiled here in the Alert. I have introduced Canadian royalty trusts as fantastic tools to help you generate the income you need from your accumulated nest egg. What's been so exciting for me is that the deeper I've gotten into researching the income investing arena, the more I have been able to discover an increasing number of truly remarkable high-income investment vehicles.
There are literally hundreds of mutual funds, closed-end funds, royalty trusts and REITs that are paying annual income streams of greater then 7%. I recently uncovered one mutual fund that consistently pays a 13% dividend to its shareholders. That income fund also is tax advantaged, i.e., because you only pay at the 15% dividend tax rate. That makes this mutual fund equivalent to an 18% yield for those in the highest tax brackets.
Of course, like any investments, these new income-generating instruments are not without risk. To help sort out the many new income opportunities, and to help you understand the risk inherent in each, I have developed a seminar which explains all of this and much more.
This seminar is entitled, Creating Passive Income: How to manage your assets, cash flow and savings to create the income you need to stop working and start living.
This event will take place Saturday, July 14, at the Orange County Hyatt. The cost is $49.95.
I will be presenting 10 income investments that are yielding greater than 7%. As with all of my investment workshops, a comprehensive notebook with a synopsis of all our research will be provided to each paid attendee.
While income investing is not right for everyone, I believe that this event will be beneficial to those of you who are in retirement or are approaching retirement. Retirees have amassed assets throughout their lives, and it is the ultimate goal of any investor to someday receive an income stream from his or her accumulated net worth. With inflation running hotter then expected and high prices constantly chipping away at your nest egg, now is the time to investigate how to generate more income from your assets and do so safely.
Another group that can benefit from this seminar consists of the many people who have amassed a significant nest egg and are just not satisfied with the income that they are receiving in money markets and CDs. These same investors often are not comfortable putting their money in the stock market, and they just are not aware of how to generate more income from their assets. We'll show you how.
But by far the largest group of investors who stand to benefit from this workshop is those who have the majority of their net worth tied up in real estate.
We are in for a difficult period of time for real estate owners. I have seen the yields on property fall to as low as 2%. The fact is that many people are simply way OVER invested in real estate. For many, a rebalancing of your real estate assets would make good sense. My real estate expert Josh Lewis will be presenting exactly how to do just that at this event.
Two Experts, 10 Investment Ideas for Income, One Date: July 14 at 9 a.m. at the Orange County Hyatt.
This three-hour workshop includes: handouts, the 10 income ideas fully explained, three strategies for maximizing your real estate equity, and audio recordings -- all for only $49.95. For an additional $10, you can bring your spouse or friend.
Click on the following link to sign up or register by calling 714.242.2880 x286 to speak with David.
I look forward to seeing you there!
BLOGS AWAY 7
Most of you probably already know that I am no longer broadcasting a daily radio show. But that doesn't mean I no longer have much to say about the markets and all matters financial. In fact, I now record a special message to Alert readers each week on my new, free audio blog.
To listen to this week's audio blog, simply click here
RED FLAGS ARE FLYING
I have lived by the beach most of my life, and swimming and surfing are two of my biggest passions. In my younger days, I spent six years as a lifeguard in Newport Beach, Calif. Those beaches can pose significant risks during the summer, especially when big southern swells roll in.
In Newport Beach, we developed a system designed to warn swimmers when those big swells created a dangerous situation. We lifeguards would fly colored flags on our towers to alert swimmers about the condition of the current. Green flags represented calm waters, yellow stood for caution when swells rose to 3-5 feet, and then the dreaded red flag was unfurled to tell inexperienced swimmers that they should not go in the water. Red flags are there for a really good reason — they are designed to warn those who may not be aware that conditions are hazardous.
Well, when I look at the stock market right now, I see a whole host of red flags.
Banking and financial stocks are sinking under the weight of the subprime mortgage bond meltdown. I know that many people do not understand how subprime mortgages could be hurting the financial sector as much as they are, since subprime loans only account for a small portion of the total number and the overall dollar amount of loans. In fact, most banks don't even hold mortgage loans in their portfolios any more.
To get a really thorough understanding of how this subprime mess is hurting financial stocks, I want all of my Alert subscribers to read what my good friend John Mauldin wrote about this situation. John is a great writer and an investment genius, and he does an excellent job at explaining the complex issues surrounding the subprime mortgage mess.
His weekly e-letter, "Thoughts from the Frontline," is a must read for me, and indeed anyone with a thirst for intelligent market commentary. This past week's issue is entitled "Where is the Real Risk in the Subprime Debacle?" and I strongly suggest that all of you check it out.
To access John Mauldin's great piece, just click here.
Another red flag that I am watching right now is the meltdown in real estate stocks. That meltdown clearly is demonstrated here via the chart of the Real Estate iShares (IYR). The slide in this sector has been fast and furious, and as more bad real estate-related news keeps flooding the media, the prospects for this sector will continue looking poor.
Finally, the failure of broad-based equities to break their June highs and the return of the S&P 500 to its 50-day moving average (blue line) are two more red flags that concern me.
What we could be seeing here is the beginning of the end of the bull cycle in equities that began in March and now is showing serious signs of weakness.
Before you commit any of your money to this market, it pays to be aware of the numerous red flags flying from those lifeguard towers. Who knows, paying attention to those market red flags actually could save you from drowning financially.
THE RIGHT QUESTIONS MAKE ALL THE DIFFERENCE
When it comes to annuities, you can't ask enough questions. Since most annuity sales involve the payment of a commission as high as 10%, you may have discovered that most annuity salesmen are quite persistent.
As regular readers know, I have been conducting annuity coaching sessions for the past few months to help those who have questions about their existing annuities or who are receiving pitches from the salesmen to buy the hundreds of annuity products available today.
I just want to continue to enforce the idea that you need to ask questions before you leap into any financial product — especially annuities. Since 90% of all annuities come with a high sales commission that is paid up front, and with big surrender fees built in to the products to discourage you from switching providers, you've really got to be a careful buyer.
Here is a recent question I received from an Alert reader regarding his annuity.
Doug,
I have been approached by a salesman regarding a fixed index annuity. He represents a company named Allianz. The name of the specific index annuity is called InCommandDex. I have read all of the propaganda and despite a few things I don't like, overall it looks like a good investment for me. I am 70 years old and would like to sink about 85% of my assets into this annuity. What do you think?
John
Here's my response to John's inquiry.
Hello John,
I have said many times before that annuities can offer great benefits to investors; however, the devil, as they say, is in the details. I don't have all the answers for you, but I do have a few opinions and questions you should be asking.
First of all, annuities work best for younger investors. The reason why is because the main benefit of an annuity is tax-deferred growth. There are two types of annuities, deferred and immediate.
Deferred annuities are those that allow young people to add to an additional retirement account, which is great because most people are under funded for that long-term goal. An immediate annuity is for someone who wants monthly income right now. From what you have told me, you're being sold a deferred annuity.
Right there I see a big problem, as you are 70 years old and I presume retired. At your stage in life you don't need tax deferral, you need income. A deferred annuity is completely inappropriate for someone your age.
If you lock up 85% of your assets in this annuity you will not be able to get at this money without penalties for 10 years. I know you can withdraw 10% a year, but that does not give you access to all of your money. So my opinion is DO NOT PLACE 85% OF YOUR LIQUID ASSETS IN A NON-LIQUID INVESTMENT AT YOUR AGE!
Here are some additional questions that may help you and other readers.
What is the commission that will be paid to the agent?
What are the surrender charge rules and terms?
What are the withdrawal provisions in this contract?
When will you start withdrawing money and what are the terms of that income stream?
What is the financial rating of the insurance company issuing the contract?
Hope this helps,
Doug
If you would like to get your FREE annuity coaching session with Doug Fabian, simply send me an e-mail.
POSITIVELY BRILLIANT 3
Every once in a while, I read something that really gets me thinking. Rather than just tell you about my most recent discovery of this sort, I will let the words speak for themselves:
"If you had enough money to pay off your mortgage right now, would you? Many people would. In fact, the ‘American Dream' is to own your own home, and to own it outright, with no mortgage. If the American Dream is so wonderful, how can we explain the fact that thousands of financially successful people, who have more than enough money to pay off their mortgage, refuse to do so?
The answer; Most of what we believe about mortgages and home equity, which we learned from our parents and grandparents, is wrong. They taught us to make a big down payment, get a fixed rate mortgage, and make extra principle payments in order to pay off your loan as early as you can. Mortgages, they said, are a necessary evil at best. The problem with this rationale is it has become outdated. The rules of money have changed."
The above excerpt was written by my friend and colleague Josh Lewis, my real estate and finance expert. You can find this kind of challenging thinking in Josh's new eCourse, which brilliantly reveals how the affluent manage home equity to safely and predictably build wealth.
This fascinating eCourse takes apart the myths and misconceptions that can cost you hundred of thousands of dollars in net worth over the years. In this fine piece of analysis, Josh teaches you about why people fear mortgages, and why you shouldn't. He also shows you how a large equity position in your home actually can be disadvantageous to your financial fitness. Finally, he brilliantly demonstrates how you can successfully manage your home equity so that you can increase liquidity, enhance safety, boost your rate of return and maximize your tax deductions.
If any of these topics resonate with you in even the slightest way, then I implore you to check out Josh's FREE eCourse.
All you have to do is sign up, and you'll embark on a really eye-opening journey through the unconventional halls of proper wealth building.
LOOKING VS. SEEING
"It's not what you look at that matters, it's what you see."
--Henry David Thoreau
Anyone can see the facts of a situation, but it takes wisdom and life experience to understand why things are the way they are. This is especially true when it comes to properly caring for your money. Before you make your next financial move, remember that it's not what you look at that matters, but rather what you see that often determines the outcome of your choice.
Wisdom about money, investing and life can be found anywhere. If you have a good quote you'd like me to share with your fellow Alert readers, send it to me, along with any comments, questions and suggestions you have about my radio show, newsletters, seminars, or anything else.