01 Feb 2020
Which one would you prefer and why? What are the pros and cons of both scenarios? Which is better in the long term?
These two asset classes may be good for diversification in your portfolio, and to choose either one will depend on your investment strategy.
High yielding bonds, because of the perceived higher risks involved, hence are high yielding. Due diligence and credit analysis may be necessary to ensure that bond payments can be made in a timely manner. What you earn from these are usually the high interest from the bonds.
As for REITS, this is an investment vehicle for many different kinds of properties and essentially, depends on the income that the properties yield. Due diligence has to be done to ensure that the REIT has potential to grow in the future by looking at organic and inorganic (acquisition) growth. REITs have a total return that includes the dividend yield and the capital appreciation (stock price movement).
In conclusion, both assets are great assets to have for income portfolio and ultimately, it’s your investment strategy that dictates this. Hope this helps.
Have fun investing!
Formerly bonds, particularly governmental bonds with AAA rating were like a 'gold standard' or benchmark of lowest risk investents. When the yields were high!
For the foreseeable future this times are gone.
You have high yield bonds (with much higher risks). Or You have REITs with
stock-like risks and no guaranteed dividends. Everything is possible.
Anyway You have to a) gauge your tolerable investment risk and b) to diversify.
The mix is philosophy. Particularly, we as retail inverstors, should not bu single stocks, when even professionals (mutual fund managers) cannot predict the future correctly.
The typical reocommended 2 block mix formerly (U.S.) was 60-70% stocks and 30-40% bonds. Of course there are also: property, commodities, gold - among others...
What bonds were in past times, i feel, should today be physical gold.
All stock investments should be as ETFs, as should all REIT investments, to be well
diversified and have less transaction stress.
As bonds and REITs are different asset classes, you would have to look at the pros and cons of both
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