79: 3 Additional Ways to Generate Passive Income (2024)
Aug 26, 2024
auto_awesome
In this engaging discussion, Robert Croak, a passive income expert, and Austin Hankwitz, an insightful investor, share strategies for optimizing yield in investment portfolios. They explore the power of Real Estate Investment Trusts (REITs) in today’s economy, especially with expected interest rate cuts. Listeners will learn about maximizing investments through high-yield ETFs and the importance of building a solid financial foundation before diving into riskier assets. This conversation is packed with practical tips for navigating the evolving landscape of passive income.
As interest rates are projected to decrease, investing in Real Estate Investment Trusts (REITs) can increase portfolio yields through enhanced dividend payouts.
Small-cap companies within the Russell 2000 index present lucrative opportunities, as lower borrowing costs facilitate refinancing and profitability, creating potential for additional yield.
Deep dives
Generating Passive Income in Low-Interest Environments
As the Federal Reserve is expected to cut interest rates, generating passive income becomes crucial for investors. With rates on treasury bills likely to fall, it's essential to consider alternative income-generating investments. The discussion highlights that lower borrowing costs can enhance the profitability of investments such as Real Estate Investment Trusts (REITs). This shift in the market encourages investors to diversify their portfolios and explore new opportunities for yield generation.
Enhancing Portfolios with Real Estate Investment Trusts (REITs)
Real Estate Investment Trusts (REITs) are recognized as a vital component of well-diversified investment portfolios, especially in a changing interest rate landscape. By being required to pay out a substantial portion of their profits as dividends, REITs can offer attractive yields. The podcast emphasizes that with the anticipated decrease in interest rates, REITs may see a resurgence in profitability, enabling them to increase dividend payouts. Specific REIT examples, such as Realty Income Corporation and VICI Properties, are highlighted, showing a positive stock trend in expectation of better earnings.
Investing in Corporate Bonds for Stable Yields
Corporate bonds are introduced as a stable yield-generating option, especially with the Federal Reserve's rate adjustments on the horizon. Recent developments in corporate bond accounts, such as those introduced by Public.com, provide investors access to diverse corporate bonds with attractive yields around 7.3%. This approach allows investors to lock in yields over a four-year period, offering more reliability compared to treasury bills, which fluctuate with the Federal funds rate. The podcast discusses the trade-off between yield and credit risk, providing insights into making educated investment decisions.
Small-Cap Companies as Yield Generators
Investing in small-cap companies, particularly within the Russell 2000 index, is presented as a strategy to capitalize on interest rate cuts. Small-cap companies tend to benefit significantly as lower rates allow them to refinance debt, thus enhancing their profitability. The podcast suggests utilizing ETFs like IWMI that provide exposure to the Russell 2000 index, bundling potential capital gains with an attractive yield through covered call contracts. This strategy aligns well with a diversified investment portfolio, allowing investors to seamlessly integrate small-cap equities for additional yield.
In this episode of the Rich Habits Podcast, Robert Croak and Austin Hankwitz share three additional ways to generate yield inside of your portfolio -- especially as the Fed is now expected to begin cutting rates.
---
⭐️ Open an account with Frec to begin direct indexing countless indices and automatically tax-loss harvest!
---
👉 Join over 44,000+ other investors who read the Rich Habits Newsletter! We're growing by +150 subscribers every day and can't wait for you to join us :)