Learn How To Pick High Quality Value Stocks From The Pros

This week we interview Eric Schoenstein about picking high quality value stocks in a volatile environment. The nature of the stock market has changed recently and most people have not noticed. Eric explains the tools necessary to not only survive in this market but thrive. Its a good time to brush up on your value stock investing.

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Consider Betterment.

It doesn’t cost much to start, and you get access to a portfolio built around your risk tolerance and your goals. Using Modern Portfolio Theory, pioneered by a Nobel laureate, Betterment can help you build wealth without getting caught up in the noise of the market.


Today's Guest:  Eric H. Schoenstein

Eric H. Schoenstein, Managing Director, Chief Investment Officer and Portfolio Manager joined Jensen Investment Management in 2002. Eric currently serves as the Chief Investment Officer with primary responsibility for portfolio management and strategy across all of Jensen’s products. Eric spent nearly fourteen years with Arthur Andersen LLP, as a Senior Audit Manager, providing a wide variety of services to clients of all sizes in both the public and private sectors. He earned a BS in Business Administration, with a focus in Accounting, from Oregon State University.

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Today's Panelists

Investment Decision Making Made Easy With Victor Haghani

Good investment decision making is hard work and requires an understanding of how the markets operate. You cannot learn this in a textbook. We discuss some of the tools on our show with Victor Haghani. Good predictors of top performing stocks, position sizing, asymmetric risk bets, and the puzzle of the missing billionaires.

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Looking for a better way to invest? 

Consider Betterment.

It doesn’t cost much to start, and you get access to a portfolio built around your risk tolerance and your goals. Using Modern Portfolio Theory, pioneered by a Nobel laureate, Betterment can help you build wealth without getting caught up in the noise of the market.


Today's Guest:  Victor Haghani

Victor founded Elm Wealth in 2011 to help himself and his family and friends capture the long-term investment returns they ought to earn. He has spent nearly 40 years actively involved in markets and financial innovation, having been a Managing Director in the bond-arbitrage group at Salomon Brothers and a co-founder of Long-Term Capital Management (LTCM).

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Today's Panelists

Conservative Option Strategies – Kirk Chisholm

This is a special interview this week where Barbara Friedberg interviews our host, Kirk Chisholm, about the top conservative options strategies that can be used to generate additional income for your portfolio. Options may be foreign to you, but these strategies pack a punch when you are looking for managing your risk, generating additional income or protecting your positions in a rocky market. 

Kirk Chisholm innovative advisory group

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Looking for a better way to invest? 

Consider Betterment.

It doesn’t cost much to start, and you get access to a portfolio built around your risk tolerance and your goals. Using Modern Portfolio Theory, pioneered by a Nobel laureate, Betterment can help you build wealth without getting caught up in the noise of the market.


Today's Guest:  Kirk Chisholm 

Kirk Chisholm is a Wealth Manager and Principal at Innovative Advisory Group. His roles at IAG are co-chair of the Investment Committee and Head of the Traditional Investment Risk Management Group. His background and areas of focus are portfolio management and investment analysis in both the traditional and alternative investment markets.


Kirk has been providing wealth management services to individuals, executives, entrepreneurs, and their families, as well as businesses and organizations since 1999. Kirk is dedicated to developing lasting relationships with all of his clients. One of the benefits of working with Kirk is his patience and his ability to provide clear, easy to understand explanations of all financial options.


Prior to integrating with Innovative Advisory Group in 2008, Kirk founded Stirling Global Advisors, LLC in 2005, a full-service private wealth management firm. Kirk has also held wealth management roles at both UBS PaineWebber and Smith Barney.


Today's Panelists

Commercial Opportunities For Investing In Space

The final frontier... Investing in space.

This week we talk to Brittany Zimmerman, who has worked with NASA, ISS, and the US DoD. She has an inside track on the current and future technologies regarding space travel. We get some great insight on the commercial opportunities of space.  If you want to invest in the final frontier, you will love this episode.

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Consider Betterment.

It doesn’t cost much to start, and you get access to a portfolio built around your risk tolerance and your goals. Using Modern Portfolio Theory, pioneered by a Nobel laureate, Betterment can help you build wealth without getting caught up in the noise of the market.


Today's Guest:  Brittany Zimmerman

Brittany has spent 30 years working on expanding her breadth of skills to build a synergy of competencies to achieve her lifetime goal: organizational success through bettering the conditions of humanity. She takes the old philosophy of leaving the world a better place than you found it to the next level. In her most recent of many ventures, Brittany is implementing her multidisciplinary expertise of space systems to simplify complexities and make life support technologies easily accessible and affordable for terrestrial humanity. For this and other projects, she is seeking partners and investors.To continually diversify her activities and skills, she has opened a new location to a 501(c)(3) where she acts as Board Member and Director of Operations for a nonprofit which ensures safety and education to cross-cultural youth in California and Arizona.

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Today's Panelists

Investing In China And Technology

We interview Bruce Liu about the best strategy for investing in China. We discuss the role of technology, why you old investing in China strategy is no longer valid and where you should invest for the future. You will definitely come away from this interview with a new insight on the Chinese economy.

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Looking for a better way to invest? 

Consider Betterment.

It doesn’t cost much to start, and you get access to a portfolio built around your risk tolerance and your goals. Using Modern Portfolio Theory, pioneered by a Nobel laureate, Betterment can help you build wealth without getting caught up in the noise of the market.


Today's Guest:  Bruce Liu

Bruce Liu, is an expert in next-generation technology investing. Before Esoterica, he was a portfolio manager and partner of PhaseCapital. He was an equity strategist at WisdomTree Asset Management and a sell-side equity strategist at Sanford Bernstein. Bruce started his investment career at Dow Chemical Pension Fund. He received his Ph.D. in Business Administration from the University of Connecticut and held the Chartered Financial Analyst (CFA) designation. 

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Today's Panelists

Is Investing In Dividend Stocks The Best Strategy?

Want to buy some boring dividend stocks? These are stocks that people would look at your funny if you bragged about them at a party. Yet these are some of the best high quality stocks you can consider today. Many of these stocks also pay you to hold them with a dividend.

Is Investing Dividend Stocks Boring?

Dividend stocks often carry a reputation for being the snoozers of the equity world. But is that necessarily a bad thing? In the age of click-bait, speculation dominates the headlines. And why wouldn’t it? Getting in early on the next world altering idea sounds like a good bet to most of us, especially if it’s as easy as it sounds. Unfortunately, it most certainly is not as easy as it sounds. That’s why it can be pay so handsomely when you’re right. Yet, the hard reality is that finding the one “story stock” that goes to the moon requires avoiding countless others that will likely see unhappy endings.

And here’s a pro tip: When it feels like everyone at the cocktail party is invested in a stock with a game-changing idea, stay away from pointy objects, because we just might be riding high on a price bubble. So, if you’re more inclined to skip the craps table like us, try looking for a strategy that builds long-term returns by avoiding failures and prioritizes those boring dividend paying stocks. The results may surprise you.

Dividend Stocks Payers Outperformed the S&P 500 but There Was a Better Option

Before diving into dividend stock performance, let’s take a quick look at two ways investors might invest for dividends.

The simplest approach? Buy stocks that pay dividends.

A more refined approach? Buy stocks that pay dividends and are growing those dividends over time.

As we can see below, either of these dividend investing approaches has shown a history of outperforming the stock market over the last 20 years. However, investing with dividend “growers” not only provided better performance, but it did so with lower volatility (risk) than dividend payers and the broader market. The point about risk is likely relevant if you’re concerned about the rocket-like climb in valuations over the last year but still want to maintain equity exposure in your portfolios.

Growth of $100,000: Dividend-Paying Stocks, Dividend-Growing Stocks and S&P 500 Index

(01/01/2000-12/31/2020)

Source: Bloomberg, as of 12/31/2021. Index performance shown is for the S&P 500 Index and does not represent TrueShares fund performance. Performance is cumulative and based on quarterly returns. The Dividend Payers or Dividend Growers category constituent inclusion or exclusion is evaluated quarterly, with performance for that group calculated for the following quarter. Dividend Payers represents performance of companies who paid a dividend in the prior quarter. Dividend Growers represents performance of companies who paid a dividend in the prior quarter and grew their dividend payments over the subsequent year. It is not possible to invest directly in an index. Performance data quoted above represents past performance and does not guarantee future results.

And it’s not just about the return benefit. Dividend “growers” also provide the ability to grow an income stream over time, an important characteristic for income-oriented investors.

We also tend to think they may be less sensitive than bonds to increases in interest rates in the near-term. This belief is driven by our view that both bond and high-growth equity security valuations benefited disproportionately compared to dividend-paying stocks as interest rates fell.

Facing an Inflationary Market

When inflation rears its head in the economy, it causes all kinds of problems as costs and prices shift for different areas of the market. When this happens, there are businesses that are ideal candidates to weather an inflationary environment. Companies with low ongoing capital costs that generate good free cash flow from their operations will have the cash on hand to make nimble and quick decisions and take advantage of potential opportunities in the market. More importantly, businesses that are well positioned to pass along any price changes to their customers tend to be ideally situated to survive and may possibly thrive during the inflationary period, coming out even stronger on the other side.

Planning Your Dividend Strategy Means Taking a Deeper Dive

Even though this is a historical look-back, an important thing to note is that the portfolio of “growers” above was constructed with a forward-looking approach; it isolated the performance of companies that grew their dividends in the subsequent year with quarterly rebalancing.

But since knowing which stocks will be part of that group in advance is impossible, how does an investor build a portfolio of dividend growers?

We believe the answer lies in:
• Identifying stocks with attractive, sustainable dividend yields for current dividend cash flow, and
• Pursuing dividend growth, which is the result of a company’s payout ratio, free cash flow stability/growth and management/board’s desire to grow dividends.

As a result, investing for dividend growth requires fundamental analysis to identify which stocks are most likely to grow and/or sustain their dividends going forward.

If the challenge of building a forward-looking dividend portfolio seems daunting, looking at managed products like ETFs may start to make sense.

Why Quality Matters

We believe in quality businesses. Quality businesses have few exciting characteristics, but they almost always have the ability to generate beneficial free cash flow from their operations and grow that cash flow over time through good management and reinvestment in their operations. Any business that can pay a sustainable dividend is likely to be free cash flow producer. Any business that can grow their dividend over time   has the potential to continue growing their cash flow through smart reinvestment in their businesses. It sounds simple, but high-quality dividend paying stocks are exactly what we believe intelligent investors should be looking for.  These are some of the highest quality businesses around.

Takeaway: Focus on Companies with Attractive Current Yields and Prospects for Dividend Growth

At TrueShares, we believe the “secret sauce” is finding companies that provide high current dividend yields with prospects for above average dividend growth.

As explored above, to execute this strategy, we believe you need to focus on companies with the potential to deliver:
• Attractive relative performance
• Lower volatility than the market
• Attractive income today
• Growing income over time

Finding companies that check all these boxes requires diligent, forward-looking research.

You should be afraid of gambling on money-losing stocks. It will most certainly end badly for many. But instead of completely avoiding the market, why not turn to something that has proven to work over time? As an active manager, it’s no surprise that TrueShares believes that staying the course with a forward-looking dividend investing strategy is an attractive option for many investors!

Important reminder: Stocks that pay high dividends or continue to grow dividends can fall out of favor with the market causing such securities to underperform companies that do not pay high dividends. Likewise, there can be no assurance that companies that have historically paid a dividend will continue to do so or may reduce dividends.

Important Information

All investments involve risk including possible loss of principal.

The content herein includes the views, opinions and analysis of the investment manager as of the date of publication. These views and information are subject to change without notice, and are not meant to be a complete analysis of any market, industry, country, or company.

Certain information herein has been obtained from third party sources and, although believed to be reliable, has not been independently verified and its accuracy or completeness cannot be guaranteed. No representation is made with respect to the accuracy, completeness or timeliness of this document. TrueShares accepts no liability for any losses arising from use of this information and reliance upon the comments, opinions and analysis in the materials is at the sole discretion of the reader.

Before investing, investors should consider the Fund's investment objectives, risks, charges, and expenses. The prospectus, or summary prospectus, containing this and other information may be obtained by visiting www.truesharesetfs.com and should be read carefully prior to investing.

RISK CONSIDERATIONS

The TrueShares Low Volatility Equity Income ETF may not achieve its objective and/or you could lose money on your investment in the Fund. The Fund is recently organized with no operating history for prospective investors to base their investment decision which may increase risks. Some of the Fund’s key risks, include but are not limited to the following risks. Please see the Fund’s prospectus for further information on these and other risk considerations.

ETF Risks. As an ETF, the Fund is exposed to the additional risks, including: (1) concentration risk associated with Authorized Participants, market makers, and liquidity providers; (2) costs risks associated with the frequent buying or selling of Fund shares; (3) market prices may differ than the Fund’s net asset value; and (4) liquidity risk due to a potential lack of trading volume. Dividend Paying Security Risk. Securities that pay high dividends as a group can fall out of favor with the market, causing these companies to underperform companies that do not pay high dividends. Dividends may also be reduced or discontinued. Equity Market Risk. Common stocks are susceptible to general stock market fluctuations and to volatile increases and decreases in value as market confidence in and perceptions of their issuers change based on various and unpredictable factors including but not limited to: expectations regarding government, economic, monetary and fiscal policies; inflation and interest rates; economic expansion or contraction; and global or regional political, economic and banking crises. Market Capitalization Risk. The Fund may invest is securities across all market cap ranges. The securities of large-capitalization companies may be relatively mature compared to smaller companies and therefore subject to slower growth during times of economic expansion and may also be unable to respond quickly to new competitive challenges, such as changes in technology and consumer tastes. The securities of mid-capitalization companies may be more vulnerable to adverse issuer, market, political, or economic developments than securities of large-capitalization companies and generally trade in lower volumes and are subject to greater and more unpredictable price changes than large capitalization stocks. The securities of small-capitalization companies may be more vulnerable to adverse issuer, market, political, or economic developments than securities of large- or mid-capitalization companies and generally trade in lower volumes and are subject to greater and more unpredictable price changes than large- or mid-capitalization stocks. Depositary Receipts Risk. American Depositary Receipts (“ADRs”) have risks similar to those of foreign securities (political and economic conditions, changes in the exchange rates, etc.) and entitle the holder to all dividends and capital gains that are paid out on the underlying foreign shares.

Index Descriptions: The S&P 500® Index is a widely recognized capitalization-weighted index that measures the performance of the large-capitalization sector of the U.S. stock market. Securities in the ETF’s portfolio will not match those in any index. The ETF is benchmark agnostic and corresponding portfolios may have significant non-correlation to any index. Index returns are generally provided as an overall market indicator. You cannot invest directly in an index. Although reinvestment of dividend and interest payments is assumed, no expenses are netted against an index’s returns. Index performance information was furnished by sources deemed reliable and is believed to be accurate, however, no warranty or representation is made as to the accuracy thereof and the information is subject to correction.

Foreside Fund Services LLC, distributor.

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Looking for a better way to invest? 

Consider Betterment.

It doesn’t cost much to start, and you get access to a portfolio built around your risk tolerance and your goals. Using Modern Portfolio Theory, pioneered by a Nobel laureate, Betterment can help you build wealth without getting caught up in the noise of the market.


Today's Guest:  Austin Graff

Mr. Graff serves as Managing Partner and Co-Chief Investment Officer for Titleist Asset Management.  He is also the Managing Partner of Shorebird Avocet Fund, a deep value and special situations investment strategy.  Prior to joining Titleist and Shorebird, Mr. Graff was a senior vice president and portfolio manager at PIMCO where he co-managed a suite of global equity strategies.  He was previously a vice president in investment banking at Goldman Sachs where he advised infrastructure, industrial, and financial institution clients on strategic transactions and restructurings totaling more than $40bn.  Prior to this he was a financial analyst at the Indiana Finance Authority where he worked on multiple transformational projects, helping to finance key initiatives for state and local governments. 

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Today's Panelists

What’s In Store for 2022 – Jeff Kleintop, Schwab Chief Global Investment Strategist

This is a great opportunity to pick the brain of the Chief Global Investment Strategist at Charles Schwab. Jeff Kleintop talks about what he thinks is in store for 2022 and how you should think about your investments. This is a great interview that you won't want to miss.

(This interview was done in January, so it does not address the Ukraine conflict.)

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Sign up to be one of our Money Tree Ultimate Insiders. You will have instant access to new episodes, automatically have access to our monthly giveaways, and the potential to be a guest panelist on our show

Looking for a better way to invest? 

Consider Betterment.

It doesn’t cost much to start, and you get access to a portfolio built around your risk tolerance and your goals. Using Modern Portfolio Theory, pioneered by a Nobel laureate, Betterment can help you build wealth without getting caught up in the noise of the market.


Today's Guest:  Jeff Kleintop

Jeffrey is Chief Global Investment Strategist at Charles Schwab & Co., Inc. He is responsible for identifying, evaluating, and commenting on significant risks and opportunities in the world's capital markets vital to investment decision-making. Cited by The Wall Street Journal as one of “Wall Street’s Best and Brightest” and known for his keen market insights he is regularly quoted in many national publications, such as The Wall Street Journal, USA Today, and The New York Times, and is a frequent guest on national business television and radio, including CNBC, Bloomberg TV, CNN, and FOX Business News. A popular keynote speaker at industry conferences, corporate events, and investing forums he regularly addresses audiences of professional and private investors across the country. He is the author of the popular investment book, Market Evolution: How to Profit in Today’s Changing Financial Markets, published in May 2006.

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Life After Debt – Marcus Garrett

This week we interview Marcus Garrett about life after debt. We discuss the learn apply teach method, how different generations perceive debt differently, growing passive income, and how to go from heavy in debt to financial freedom. Learn from an expert who literally wrote the book on getting out of debt.

The Wealthy Call It Cash Flow Management

"We call it budgeting, but the wealthy call it cash flow management. And when we're talking about debt, they don't call it debt. They call it leverage."

This quote moved in and now lives in my head rent-free.

Life After Debt

Like most Americans, I was taught all my life that all debt is bad. This is incorrect. You can successfully argue that most debt is bad. In fact, with a few exceptions (like 0% interest), most all credit card debt is bad. I spent 7-years of my life paying off debt that was mostly accumulated in less than three months. That’s how quickly debt can compound when you’re irresponsible, don’t budget, and double down with high-interest debt to fund your lifestyle inflation.

Specifically, why is credit card debt so bad?

The tyranny of credit cards are some of the worse type of debt, perhaps only superseded by payday loans, because they combine the best of the worst worlds: 1) high-interest debt, and 2) low-interest minimum payments. For example, according to a recent survey, the average household has about $7,000 in credit card debt. Assuming they have the average APR of about 14%, if they only make the minimum payments on this debt, they won’t be debt free for another 30-years.

Put another way, their $7,000 debt–assuming they never add another dollar–will cost them 343 months of their life at a total interest rate payment of $9,132!

I would argue that paying $16,000 to borrow $7,000 is almost universally bad debt. However, there is an exception where debt can be used for good. This is where everything we’ve learned about debt gets complicated by the realities of the real world.

The Rich Don’t Call It Debt

“The wealthy call it cash flow management.”

When used strategically, credit can be used to make you wealthier. For instance, credit has allowed many Americans to leverage their buying power in ways that would not have been impossible just a few decades earlier. Whether they view it this way or not, many individuals do benefit from credit.

The most obvious examples, include most car and homeowners. Many of us can’t afford to pay cash for the cars we drive or the homes we live in. While you could argue this means that too many of us are simply living outside of means, I disagree with that blind blanket statement. Yes, perhaps too many individuals over-leverage themselves because they were never taught the power of proper cash flow management. Then again, installing a pool automatically increases your odds of drowning. This doesn’t mean pools are inherently dangerous. It means we need to put the proper protections in place for people who might be around the pool. Like learning to swim, learning financial literacy, debt, and wealth management can give us the wisdom necessary to not only reduce the risk, but in fact, to enjoy the experience (the money, and the pool).

In our more relevant case study, when you can maintain good credit, you are given access to low or interest-free loans that allow you to leverage your finances to build wealth. CBS News found that improving a credit score from “fair" (580 to 669) to "very good" (740+) can save the average household nearly $60,000!

If you’ve got access to the capital or already come from wealth, then cash may be your best and logical option. For the rest of us on the other hand, we can use someone else’s money to lessen or own personal risk. Further, if we can responsibly manager our credit, we can get more access to capital and wealth through options like zero- or low-interest rate loans/credit that allow us to buy or afford assets we otherwise could not. The key here is to use those funds not to by cars with big rims (like a younger, ignorant version of myself did), but instead, to invest in appreciable assets. This mindset shifts us from debt-minded to wealth-minded. I feel this is where I have finally mentally graduated in recent years. Fortunately, my financial literacy is aligning with my financial ability as I have moved up in my career and opened my own second business.

Afterall, the key to overnight success is the first 10 years.

The Wealthy Mindset

With this new perspective, I’m excited to see what I can do next. For example, my future wife and I are both looking into ways to multiply our income streams. If we continued to rely only on traditional work, statistically, we could only expect to see our pay stagnate by our 30s and 40s, respectively.

We want binary options because that makes our choices, and our lives, simple. Unfortunately, life is complicated. Typically, our options are presented to us on a spectrum. There is no longer the simple choice of “right versus wrong,” and universal “truths” like “all debt is bad” don’t stand up against the test of time. Instead, we have to adapt our financial choices to our unique lifestyle goals. For me, that’s opening my own business, scaling an online brand, and building a Community of thousands where I share what I learn along the way. Equally important, they share what they’ve learned with me.

When I was young, my father told me to, “use your 20s to learn, 30s to apply, and 40s and beyond to teach and mentor.” I was recently recognized for my mentorship to high school students with Dream Walkers. Encouragingly, when I shared this quote with a 50-year old friend of mine, they had one tweak. “You should use your 20s to learn, 30s to apply, 40s to have fun, and 50s to teach and mentor.”

I guess I’m still not done learning new things! And neither should you.

Marcus Garrett is the host of the award-winning ‘The Marcus Garrett Show’ (Best New Personal Finance Podcast, 2021), and the bestselling author of D.E.B.T Free or Die Trying: How I Buried Myself $30,000 in Debt and Dug My Way Out. Today, he has weekly entertaining conversations with your favorite influencers and entrepreneurs about Life After Debt.

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Looking for a better way to invest? 

Consider Betterment.

It doesn’t cost much to start, and you get access to a portfolio built around your risk tolerance and your goals. Using Modern Portfolio Theory, pioneered by a Nobel laureate, Betterment can help you build wealth without getting caught up in the noise of the market.


Today's Guest:  Marcus Garrett

After surviving the mean streets of the inner suburbs in the Great State of Texas, Mr. Garrett obtained a Bachelor of Arts in Business Administration and work experience as a Certified Internal Auditor, Financial and Data Analyst. As a Senior Millennial, his inflated self-esteem was amplified with participation trophies given to him without merit during his most impressionable years. Somehow he overcame these personal roadblocks to become an award-winning freelance writer on topics ranging from love and relationships to debt and personal finances

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Today's Panelists

Benefits Of Investing In Real Estate At Any Age

This week we interview Ralph Germain about the benefits of investing in real estate syndications and how to start out your real estate portfolio in syndication investing.

5 Benefits of Investing In Real Estate

By: Ralph Germain, REILVEST (Co-Founder and Director of Investor Relations)


These days, there are many options for investing. From the tried and true methods of investing such as mutual funds and bonds, to the more risky and volatile options like stocks, cryptocurrency, NFT’s, and the metaverse. It’s all a delicate balance of risk vs reward. One of the tried and true vehicles for investment is real estate. While many investors think you need a large amount of capital or an incredible amount of time to invest in real estate, the truth is you can invest in real estate with limited capital and if you partner with others as a passive investor it can require almost no time. But what are the benefits of investing in real estate as opposed to other options like stocks, bonds, or crypto? What advantages do you get from investing in real estate as opposed to a tech startup or opening a restaurant? The list of benefits for investing in real estate is exhaustive and impressive. And I’m not just saying that because I am a real estate investor, but when compared to other investment vehicles, real estate is unrivaled. Here are just a few of the most attractive benefits when it comes to investing in real estate 

Cash Flow

Cash flow is defined as the remaining cash from income received after all expenses and debts have been paid. Unlike stocks, and bonds, Real Estate is one of the few investments that provides a generous cash flow depending on the deal and the property. Whether monthly or quarterly, cash flow from rental income is consistent and reliable. The additional income also helps with your current expense to income ratio, giving you more financial flexibility. If you are thinking about retirement, cash flow from real estate investing provides a cushion for retirement earnings. If you work full time, cash flow from real estate investing combined with your wage income can help you leverage your time better. Meaning you may be able to work less because of the additional income you are getting from a cash flowing property. The biggest thing to understand here is that the cash flow is consistent and reliable. Every month tenants are paying rent, and that rental income is the basis for cash flow. While some stocks offer dividends to their investors, those dividends are usually paid quarterly, with some companies paying semi-annually or annually. And the dividends are typically much less than the cash flow that real estate usually returns. The S&P 500′s average dividend yield for example, is approximately 2.00%. 


Appreciation

Appreciation is what happens when the value of property increases, and it is no secret that the value of Real estate tends to go up over time. In fact over the last 10 years, property values have grown by more than 50%. National appreciation values average around 3.5 to 3.8 percent per year. So investing in real estate (in addition to the cash flow) provides investors the opportunity to make an almost certain winning bet that their investment will be worth more in the future. This is not the case with other investment options like investing in a tech startup. While an idea from a new tech company may prove to be revolutionary initially, there is always a newer idea, a smarter app, or better option that causes that revolutionary idea to become an unnecessary commodity. However, people will always need a physical place to live or run their business. They haven't created the app that can replace that yet. Therefore the necessity of real estate is what almost guarantees its appreciation

 

Forced appreciation

In addition to natural appreciation, there is what's called forced appreciation. Buying an old car and restoring it to its original condition and operational performance causes that old hunk of metal to be worth more. In the same way, buying an old or distressed property and fixing it up increases its value. This is what we mean when we say value-add property. In some cases, just a little paint and updating to the appliances can increase the value or rental potential of a property exponentially. Or you can increase the rents if they are below what other comparable units in the area are going for. That will increase your income the property is generating, and thus increase the value of the property. You can also modernize your operations and optimize your expenses for even more added value. I can’t think of any other investment opportunity where you can force it to be worth more.


Tax Savings & Benefits

Although every investor is different, many have a few things in common. One of things most have in common is trying to figure out how to keep more of your own money. One of the most attractive benefits to investing in real estate is the tax savings it provides. Many of the expenses involved in owning/operating a rental property are tax deductible. Things like insurance, interest, property management fees, repairs, capital improvements, or ongoing maintenance can all reduce your tax burden. Another tax saving tactic is depreciation. You can depreciate the cost of the property over time as long as you have owned if for more than a year in most cases. By depreciation, I mean you can deduct a property's loss in value over its expected life. Meaning to the IRS, the property will be worth less year after year on paper, while in actuality it is increasing in value. Depreciation as a tax strategy can ONLY be used on investment properties, making it a unique tax advantage that you can only benefit from if you are a real estate investor. Once you do decide to sell an investment property, the profit from that sale will be taxed as a short-term or long-term capital gains, which is typically a lower tax rate than ordinary income tax. Long-term capital gains, which means you’ve owned the property for at least a year, are taxed more favorably, from 0% up to 20% depending on your tax bracket. If that's not enough, there are other options that defer or avoid you paying taxes all together. The 1031 exchange tax option, for example, gives investors the option to defer paying capital gains taxes altogether if they use the profit from the sale to purchase another property. I’m not a CPA or tax accountant, so before you invest in real estate, discuss your goals with a tax professional.


Protection from Inflation    

Inflation has been the talk of 2022 so far. With the rising cost of goods and services, as well as the ever- increasing cost of living caused by inflation, the buying power of each dollar is less and less every year. Keeping cold hard cash in a bank account means you are losing money as inflation rises. Because the cost of everything else is going up. Real estate provides natural protection from inflation. As prices rise, and as the buying power of the dollar decreases, the cash flow you get from the property also increases. If home prices rise in your market, rents will also naturally increase. So investing in real estate provides you with the ability to keep pace with inflation. 

If you are thinking about investing in real estate, besides considering this short list of benefits here, you should also consider the risks involved. Real estate, like every other investment, has inherent risks, that if not managed or properly mitigated could cause loss of capital. But even with the risks, real estate is pound for pound the best investment vehicle for financial flexibility, time freedom, wealth building, and creating passive income


Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.

About the Author

Ralph Germain is the Director of Investor Relations for REILVEST, a multifamily syndication company focused on the freedom and benefits that passive real estate investing provides. 

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Today's Guest:  Ralph Germain

Ralph Germain is an investor and entrepreneur, in addition to working non profit. Ralph is co-founder of Reilvest, a real estate syndication firm, but his career did not start out in Real Estate. Ralph graduated college as a first generation grad, and started working for Bank of America. Although, making a lot of money, He did not quite feel fulfilled so he decided to work non profit at an alternative High school as a counselor. Ralph was continually promoted and worked his way all the way up to Director of a High School until they lost a major funder, and unfortunately, he was laid off, and that's when he discovered that although the work was fulfilling, I was not financially secure. That's when I found real estate.


Fast forward a few years later, Ralph and his partner (Dhanesh Shelat) now own 400+ units in their real estate portfolio across NY, OH, and TX, and they continue to grow their business. Ralph still works full time as a Director for High School with 3000 students. Among all these accomplishments, his proudest is being a girl-dad.

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Today's Panelists

Zillow Real Estate Market Insights With Jeff Tucker

This week we interview Senior Economist at Zillow, Jeff Tucker. We discuss the state of the real estate market, what's changed, and what trends you need to be aware of.

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Follow us on
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Sign up to be one of our Money Tree Ultimate Insiders. You will have instant access to new episodes, automatically have access to our monthly giveaways, and the potential to be a guest panelist on our show

Looking for a better way to invest? 

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It doesn’t cost much to start, and you get access to a portfolio built around your risk tolerance and your goals. Using Modern Portfolio Theory, pioneered by a Nobel laureate, Betterment can help you build wealth without getting caught up in the noise of the market.


Today's Guest:  Jeff Tucker

Jeff Tucker joined Zillow in 2018. He is currently a Senior Economist on the Economic Research team, where he combines Zillow’s industry-leading real estate database with macroeconomic and demographic data to understand the forces shaping the American housing market. His research interests include household formation, homeownership, and housing supply. He has presented at numerous real estate industry gatherings and appeared on national and local media outlets covering real estate, including the Wall Street Journal, The Atlantic, and NPR’s Marketplace. Jeff received his M.A. in Economics from the University of Washington, and his B.A. cum laude in Economics from Amherst College. Before graduate school, Jeff worked on economic analysis for antitrust litigation and merger review. He resides in Seattle, Washington.

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Today's Panelists