The Portfolio Killer

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“Fed’s Kashkari: More rate hikes ahead, and possible recession…” ​(reuters.com)

“Danger ahead: The U.S. economy has yet to face its biggest recession challenge…” (cnbc.com)

“Google chief people officer addresses potential layoffs…” (hcamag.com)

“Recession and Stagflation Are Some of the Biggest Risks Ahead…” ​(bloomberg.com)

“Jobless claims at 8-month high as layoffs edge higher…” (cbsnews.com)

The title of this article reads “The Portfolio Killer.” Still, the truth is, in the current uncertain economic environment, there can be more than one “Portfolio Killer,” whether it be inflation, recession, unemployment, or the next black swan event. However, the one suspect standing out in the lineup right now is inflation.

​​In June, inflation hit 9.1%, another 40-year high, and if your portfolio is not earning at least 9.1%, it’s getting decimated by inflation.

Here’s a look at how some of the traditional and popular investments have fared this year:

Stocks.

​Stocks have not fared well this year in the face of runaway inflation. Year-to-date, the S&P 500 is down more than 12%, the Dow is down more than 10%, and the Nasdaq is down more than 18%. With the Fed raising interest rates to fight inflation, there could be more pain in store for stocks on the road ahead as consumer and business spending slow in response to higher borrowing costs.

CD’s / Money Market / High Yield Savings Accounts.

​According to Nerdwallet, the best rate listed right now on a CD with a fixed 5-year term is 3.25%. The best rate listed for MMA’s is 1.65%. The best rate listed for HYSA’s is 2.21%. At current inflation rates, in the best scenario (the 5-year CD), inflation is killing your portfolio at a rate of -5.85% per year.

Treasuries.

​The current 10-year treasury rate currently sits at 2.835%. Inflation is killing that portfolio at a rate of -6.265% annually.

Crypto.

​This latest round of inflation has been the first test for crypto, and it’s been ugly. Crypto is down across the board year-to-date, with Bitcoin down more than 48% and Ethereum slightly worse, having shed more than 49%.

Annuities.

​Some of the best fixed-income annuity rates right now hover in the 4.5% range, but that doesn’t take into account administration fees of 1-3% annually, putting real rates at 1.5% to 3.5%. In the best-case scenario, inflation is killing annuities at a rate of -5.6% when considering inflation.

Don’t be a victim of inflation!

With your portfolio, you can sit back and watch Rome burn or tackle it head-on and profit from it. Have you ever noticed that when hurricane warnings hit that while most people are scrambling for shelter, a segment of the population is profiting from the disaster? The store owners selling essential goods like food, water, generators, and fuel raise their prices to profit from skyrocketing demand.

The key to defending yourself against a portfolio killer is to bulletproof your portfolio and turn the tables on inflation, not merely surviving it but prospering from it.

​​How?

​​By allocating to an asset that not only does well in a good economy but particularly outperforms during bad times. That asset is mobile home communities (MHCs).

MHCs have demonstrated their resilience time and again. In the aftermath of the Financial Crisis in 2008, the MHC segment was one of the few segments that saw sustained growth – a growth that has persisted to this day because of constrained supply and heightened demand. That gap will not be closed any time soon as strict zoning ordinances have prevented the development of new communities.

According to Green Street Advisors, based on NOI, the MHC sector has been an all-star performer since the start of the COVID-induced downturn and is expected to continue to outperform all other sectors through 2024.

​​In 2020, during the onslaught of COVID-19, industrial and MHCs were the only sectors that saw rents and occupancies rise. Sebastian Obando, “Institutional Investors Bet on Manufactured Housing as Occupancy, Rents Continue to Grow.” wealthmanagement.com (Sep 29, 2020).

Like residents hitting store shelves for food, water, and fuel in the face of disaster, MHCs have always been a haven for residents seeking more affordable shelter from economic storms.

MHCs have always been an all-star performer and have always served us well at Four Peaks, providing consistent fixed returns of 12%-14% annually for us and our investors – fixed returns that have proven their resiliency in good times and bad.

​​Why be a victim of inflation?

​​Why not profit from it by investing in MHCs for reliable passive income capable of compensating for job loss?

Contact us today to speak to one of our knowledgeable advisors to learn more about how you can bulletproof your portfolio and profit from inflation.

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