Doc Eifrig: The secret to making money from any income investment
Editor’s note: Today we’re passing along another exclusive excerpt from Doc Eifrig’s Income Intelligence, a brand new service designed to maximize the income you receive from your investments. Below, Doc explains the three things you need to know to profit from any income investment…
From Dr. David Eifrig in Income Intelligence:
As I mentioned before, income investments are just different ways to package productive assets.
Real estate investment trusts (REITs), for instance, generate income by renting out real estate and passing on the rent payments to shareholders. Master limited partnerships (MLPs) own industrial assets like oil pipelines and similarly pay shareholders a percentage of the fees they generate.
To properly invest in these income markets, you have to understand the underlying assets. That doesn’t mean you have to become an expert in real estate or oil pipelines.
As long as you invest over a longer-term time frame and you’re buying into established, profitable businesses, there are only three things you need to know about the underlying assets…
|•||How does inflation affect this asset?|
|•||How do interest rates affect this asset?|
|•||How does the state of the economy affect this asset?|
Of course, those three questions are important to note for any investment… but they are specifically relevant to income investors.
As I mentioned earlier, inflation is the No. 1 obstacle income investors face. Certain assets appreciate in price during inflation. Others move in the opposite direction.
Generally, stocks rise with inflation. If inflation causes prices to rise, a company can raise its prices. All of its assets “on the books” – like machinery and real estate – will rise in price, too.
Since many companies hold real assets, stocks offer some protection from inflation.
This is true especially with stocks (or other investments) tied to commodities. That’s because gold, oil, natural gas, and agricultural commodities are called real assets. If you own an asset that profits from commodity inflation, it should rise as well. For example, an oil company like Chevron profits when oil prices go up.
On the other hand, bonds react differently to inflation. Since they pay out a fixed dollar amount – say, $100 a year – that $100 won’t be worth as much in the future if inflation is high. That means you’ll be stuck earning the same $100 every year from your original investment… but that $100 will be worth less, thanks to inflation. The same goes for government bonds, corporate bonds, preferred stocks, and fixed annuities – all so-called fixed-income investments.
Having said that, you might think you only want assets that rise along with inflation. But that’s not the case. What if it turns out that inflation is low in the future or even goes down? That’s when you want fixed-income assets whose future payments buy even more. During recessions and low (<2%) inflation periods, these assets perform very well. That’s why you need a mix of both asset types… but you also need to know what type you’re looking at to make an informed decision.
Finally, you need to know how the health of the economy will affect your asset. During recessions, some income investments may have to cut their payments. For instance, stocks may see lower earnings and be forced to cut their dividend payments.
By spending a short amount of time thinking about the assets you’re buying, and the economic environment, you can make sure both your income and your capital are safe.
P.S. I’ve spent the past 18 months developing a radical new approach to income investing. It’s based on my study of how various income investments actually make money. My strategy uses 10 proprietary signals to pinpoint the exact right moments to buy – and sell – any income investment.
I’ll reveal all 10 of these triggers TONIGHT – live and in person – during a FREE online training session called: The Eifrig Breakthrough: How to Use “Timing Triggers” to Earn 1,001% More Income than Others. To join me, click here now.
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