Cash-flow investing is increasingly attractive during times of increased market volatility
The outlook on the Omnicron variant of COVID-19 on global markets is changing by the minute, but I am reminded of a tried-and-true approach that can provide investors with some peace of mind during uncertain market conditions: focusing on the value quality that cash flow adds as opposed to movements in the asset price.
Cash-flow investing, in basic terms, means purchasing an asset that provides income at regular intervals versus one solely based on price appreciation. Whether it is monthly, quarterly, semi-annual, etc., you will receive regular cash distributions that can be reinvested or used to finance your lifestyle.
Considered a relatively conservative approach to investing, acquiring cash-flow-producing assets can be attractive for a number of reasons.
First, the asset will provide value on a regular basis regardless of its current market price. A temporary drop in value can be viewed as positive for cash-flow investors because they can now use the distribution amount to buy more of the asset at a distressed price, hence increasing their future cash-flow amount.
Secondly, dividends or proceeds from cash-flow investments can be used to fund lifestyle expenses in retirement without eating into your overall pot of capital.
This shift in focus from market price to value can help diversify investment portfolios and mitigate the impact of public market uncertainty. Ultimately, cash-flow investments provide flexibility to rebalance, protection against market volatility, and peace of mind that you’re earning sustainable income with less concern about the economic impact of current events.
For example, in February 2020, we switched our monthly cash-flow-producing assets from reinvest to pay out for many clients when public equity markets sharply reacted to COVID-19 uncertainty. This free cash flow allowed us to purchase dividend-paying equities at a large discount for the ensuing six months until they reached their pre-pandemic valuations.
Dividend-paying equities are just one of several types of cash-flow investments.
Real estate : Cash flow is the result of proceeds from rent collected. The value of the property will likely appreciate over the long term, but the cash flow produced monthly or annually is relatively consistent. The goal here is for the income from the property to cover all your costs on the property and provide a steady profit.
Investing in a real estate fund can be an excellent source of passive income and provide steady long-term returns. Real estate funds can have a similar return to individual property ownership without the added stress of personally maintaining the property.
Mortgage funds : Cash flow comes from regular loan interest repayments over the term of the loan. Loans are often secured by real property with a varying loan-to-value ratio.
Private assets : Assets such as private debt offer higher-yielding returns with significantly lower volatility than publicly traded securities. By their nature, private assets are not subject to the same whims of the crowd that the public markets are.
Dividend-paying stocks : Arguably the most volatile cash-flow-producing investment available to the average retail investor. The income from dividend-paying stocks can be less consistent than other cash-flow-generating assets. Also, your investment value can fluctuate depending on market events and the company’s performance. One strategy for mitigating some of the volatility is to invest in a fund focusing on long-term growth in a large number of dividend-paying stocks.
Bonds or bond funds : Bonds, essentially the debt of companies or governments, can provide relatively low returns, but are generally viewed as safe investments depending on their rating. Again, a way to protect your bond investment and still see regular cash flow is to invest in a bond fund that provides diversification across the bond market.
As a whole, cash-flow investing helps protect investors in volatile markets while also taking advantage of temporary market troughs. This is one strategy I would recommend to all investors regardless of portfolio size. If there’s one thing I’ve learned over the past number of years, there’s never a wrong time to start.
James McCarthy, CIM, is a senior wealth associate/client relationship manager at Nicola Wealth. This article should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. All investments contain risk and may gain or lose value. Nicola Wealth is registered as a portfolio manager, exempt market dealer and investment fund manager with the required provincial securities commissions.
LONDON — Britain must pay for increased support to households in a way that does not deter investment, Cabinet Office minister Steve Barclay said on Thursday ahead of an expected announcement of new measures to cope with rising energy bills.
Facing intense political pressure to provide more support for billpayers coping with what opponents and campaigners have called a cost-of-living crisis, finance minister Rishi Sunak will give a statement to parliament setting out details of the government’s response.
“In terms of paying for that, as we look at the balance between how much is done through debt, and how much is done through revenue raising, we need to do that in a way that doesn’t deter investment,” Barclay told Sky News.
Sunak’s announcement is expected to include a 10 billion pound ($12.6 billion) package of support, an energy industry source said, funded in part by a windfall tax on oil and gas producers companies.
Barclay said the government had decided to act after an announcement by the energy regulator earlier this week that a cap on gas and electricity bills was set to rise by another 40% in October.
“What we do recognize … is the government needs to have targeted support, particularly for those most affected by those higher bills,” Barclay told the BBC.
Global gas prices soared last year when the reopening of world economies from pandemic lockdowns caused demand to return sharply and supply could not keep up. The war in Ukraine has pushed up prices further in 2022.
The government has previously said it is opposed to a windfall tax on energy suppliers because it would deter them from investing in new energy projects.
But that position has shifted as political pressure for action has mounted, with the highest inflation among G7 nations and rising bills pushing many household budgets to the limit.
Prime Minister Boris Johnson is also keen to move the conversation away from a damning report detailing a series of illegal lockdown parties at his Downing Street office.
The opposition Labour Party has campaigned for a windfall tax on oil and gas companies to raise around 2 billion pounds ($2.5 billion), with opinion polls showing public support for such a move.
Asked about a windfall tax, Barclay said he disagreed with the Labour proposal, but declined to give any further details of the government’s new plan, saying it was for Sunak to set out the package to parliament later.
Sunak is expected to speak around 1115 GMT.
Inflation reached a 40-year peak of 9% in April and is projected to rise further, while government forecasts last month showed living standards were set to see their biggest fall since records began in the late 1950s.
In February, the government announced a 9 billion pound support package, including a targeted tax rebate worth 150 pounds per year for 80% of households in England and a 200 pound discount on electricity bills, repayable over five years.
Media reports said that discount could be increased in Sunak’s package, and the need to repay it dropped.
The Institute for Fiscal Studies (IFS) economic think tank said any support needed to be aimed at the poorest households, warning that a universal giveaway, including for those who did not need the extra cash, could fuel inflation.
“We do need to be careful,” IFS director Paul Johnson told BBC radio. “Putting … tens of billions into the economy at a time of high inflation could stoke additional demand and make the inflation much more permanent.” ($1 = 0.7963 pounds) (Reporting by Muvija M, writing by William James, editing by Hugh Lawson and Frank Jack Daniel)
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TORONTO, May 25, 2022 (GLOBE NEWSWIRE) — Westboro Mortgage Investment Fund has paid a bonus distribution of $0.065 per eligible Class F unit. The bonus distribution equals the excess income earned by the fund for the fiscal year ended December 31, 2021. The total distribution per unit for the 2021 fiscal year, inclusive of this bonus distribution, was $0.65/unit on a monthly basis, or an annualized return of 6.7%, on a monthly compounded basis. The strong performance of the Westboro Mortgage Investment Fund is a direct result of the following: a) long standing and strong broker client relationships b) best in class staff; and c) conservative and thorough underwriting practices.
“It was a record breaking year filled with a unique set of challenges posed by the pandemic. We will continue to be conservative in our underwriting and portfolio management while being competitive on interest rates and terms offered to our longstanding broker client network. In 2021 and early in 2022 we were fortunate to attract top industry talent to join our already dynamic team. We want to fund the best mortgages, not the most mortgages. Our focus is, and always will be, the preservation of investor capital and providing consistent risk adjusted returns to our mortgage fund investors,” said Nick Christopoulos, CEO of Westboro Mortgage Investment Fund.
About Westboro Mortgage Investment Fund
Westboro Mortgage Investment Fund was established in 2004 as a Mortgage Investment Corporation in the Ottawa region. Throughout the years, the fund has strategically expanded its lending region to include Central and Southwestern Ontario and the Gatineau regional area of Quebec. Today, the fund manages assets in excess of $300 million all while maintaining the primary objective of providing investors with a consistent and stable fixed income solution for their investment portfolio.
To learn more about the Westboro Mortgage Investment Fund, including investment opportunities and qualification criteria please visit www.westboromic.com or contact the Vice President of Fund Sales, Scott Roberts at email@example.com.
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