In the investment world, choosing the right asset class can make a significant difference in the returns you generate. While traditional options like Treasury bonds or certificates of deposit (CDs) have long been considered safe havens for conservative investors, there’s another compelling alternative that can offer both stability and attractive yields: Mortgage Real Estate Investment Trusts (REITs). In this blog post, we will explore why investing in mortgage REITs might be a smart move in today’s financial landscape.
Attractive Yield
Even in today’s higher interest rate environment, generating substantial returns can be challenging. This is where mortgage REITs have an edge over Treasury bonds and CDs. Mortgage REITs are companies that invest in mortgage-backed securities and generate income from the interest payments made by homeowners. In the case of the ZINC Income Fund, interest payments from those that the fund has lent to for fix and flip single family home investments. Due to the inherent risks associated with mortgages, these REITs often offer higher yields than government bonds or CDs. By investing in mortgage REITs, investors have the potential to earn attractive dividends, often with yields ranging from 8% to 12%, depending on the risk profile of the REIT.
Diversification Benefits
Investing solely in Treasury bonds or CDs can leave your portfolio vulnerable to interest rate fluctuations. Mortgage REITs, on the other hand, provide an opportunity for diversification. These REITs typically invest in a variety of mortgages, including residential, commercial, or government-backed loans, or have the REIT’s investment spread across multiple loans in one targeted asset class like the ZINC Income Fund. This diversification helps mitigate risks, reducing the overall volatility of your portfolio.
Inflation Hedge
Inflation erodes the purchasing power of fixed-income investments such as Treasury bonds or CDs. Mortgage REITs can act as an effective hedge against inflation due to their dynamic nature. As inflation rises, mortgage rates tend to increase, leading to higher interest payments and potentially greater dividends for mortgage REIT investors. By investing in mortgage REITs, you position yourself to potentially benefit from inflationary pressures, which continue today.
Active Management and Expertise
Mortgage REITs are managed by experienced professionals who specialize in the mortgage market. These experts analyze and select mortgage-backed securities based on factors such as credit quality, interest rate risk, and prepayment risks. Their active management approach aims to optimize returns and navigate changing market conditions. This level of expertise can be advantageous for investors who prefer a hands-off approach and rely on professionals to make informed investment decisions.
In today’s higher interest rate environment, Treasury bonds and certificates of deposit may still not provide the returns that investors seek or need to keep up with inflation. Mortgage REITs offer an appealing alternative, providing the potential for higher yields, diversification benefits, inflation hedging, and active management. As with any investment, thorough research and a diversified approach are key to mitigating any risks. If you’re an investor seeking income generation and stability, considering mortgage REITs, like the ZINC Income Fund, could be a prudent choice.
To learn more about the fund and how you could benefit from our 8% yield and monthly distributions CLICK HERE or contact us directly at 559-326-2509.