CD Ladders

momopi said:
Recently I've been looking at Fidelity CD Ladder:
https://www.fidelity.com/fixed-income-bonds/cd-ladders

Seems relatively easy to setup with them.

Does anyone have an opinion on this, or preference for alternatives such as T-Bills/Bonds?
Click to expand...

I am personally not a fan of CDs as banks don't really offer market interest rates on them.  If you just bought a 2y treasury bond itself today, you have locked in 2.46% returns if you hold to maturity , way better than that CD.  And also a lot more liquid

think of it this way - in a scenario where you need to break the CD / sell the bond, if your cash flow is otherwise hurting due to a bad economy , then rates are rallying as well meaning that 2y bond can be sold for more than face value (100)

if we are in a stronger economy, and fed is hiking much faster , chances are, you don't need to sell that bond (even if it is marked below 100 temporarily, if you simply hold it to maturity you will get 100 back)


 
Momopi...

Have u considered reits? I am in one that yields 8.5% apy and the monthly Dividends have been increasing. Year over year. Every monthly Dividend reinvests simiiar to real property and has done me well so far.
 
Panda said:
Momopi...

Have u considered reits? I am in one that yields 8.5% apy and the monthly Dividends have been increasing. Year over year. Every monthly Dividend reinvests simiiar to real property and has done me well so far.
Click to expand...

Publicly traded REIT's will get hit hard by higher interest rates.  For one thing, many of them are highly leveraged (which is how they produce an 8.5% yield), but also high yielding investments are generally overpriced compared to the stock indexes because of all the yield chasers during QE 1-3.  The reversal to the mean will hit high yielding investments hard, so I view them as higher risk right now.

There might be some private REIT's that focus on narrow areas that will do ok (such as mobile homes), but for the most part I would avoid REIT's that invest in retail, office, and industrial, both because the internet & globalization are eating away at these sectors, and also because we are at the top of the business cycle when things are hottest, right before a decline begins. 

These good times could last awhile longer - maybe all the way until 2020 - but it's best to prepare for when they inevitably come to an end.
 
Panda said:
Momopi...

Have u considered reits? I am in one that yields 8.5% apy and the monthly Dividends have been increasing. Year over year. Every monthly Dividend reinvests simiiar to real property and has done me well so far.
Click to expand...


Welcome back Panda!

I'm already heavily invested in REIT's with Griffin Capital  (https://www.griffincapital.com/).

I'm selling an investment property to pay off bills/debts, and planning to bank the remaining funds in cash position (CD/T-bills/bonds).
 
Thanks Momopi,

You realize that we've known each other in the Irvine Social Media Space for 11 years and still have our original names from 2007. I've yet to meet you in person :) You always talked about food so I thought you were some Chef in Orange County and had no idea how savvy you are in terms of personal finance.

For me, I see passive income in four main categories:

Category
1) Interest Passive Income
2) Real Estate Passive Income
3) Dividend Passive Income
4) Business Passive Income

My two favorite passive income sources are Real Estate and Business Passive Income. Mortgage REITS and Real Estate REITS would fall in category 3 (Dividend Passive Income). REITs are great as you can dollar cost average every month during and up and low markets and it is truly passive. I also read that selective good quality REITs would outperform S&P 500 in a 20 year horizon due to its dividend reinvestment.

mREITs are more liquid with high yield but has interest rate risk and no potential for capital appreciation. I like to diversify between the mReits and Real Estate REITs.

REITs work very well within ROTH IRAs as taxes from the reinvested monthly dividends are tax deferred. I am fan of ROTH IRAs as you solve the tax problem upfront and pay no taxes in the backend. Also with REITS, you don't have to worry about the terrible Three Ts : Toilets, Termites, and Tenants. However, I also don't believe Real Estate would be a great investment without leverage which is why we deal with owning real properties.

I know $100,000 passive income won't get you very far in terms of retirement in SoCal, but that amount is enough to retire here in Atlanta. Here are some target you can set for yourself to reach the $100,000 / Passive Income number.

$20,000 - Interest Passive Income - Money Market & CD laddering
$30,000 - Real Estate Passive Income : 2-4 SFR Rental Properties
$20,000 - Dividend Passive Income : ie. Reits, mReits, high dividend blue chips like AT&T, Exxon, or GE.
$30,000 - Business Passive Income


 

Welcome back Panda!

I'm already heavily invested in REIT's with Griffin Capital  (https://www.griffincapital.com/).

I'm selling an investment property to pay off bills/debts, and planning to bank the remaining funds in cash position (CD/T-bills/bonds).

momopi said:
Panda said:
Momopi...

Have u considered reits? I am in one that yields 8.5% apy and the monthly Dividends have been increasing. Year over year. Every monthly Dividend reinvests simiiar to real property and has done me well so far.
Click to expand...
Click to expand...
 
You must log in or register to reply here.
Back
Top