A massive demographic shift meets a cash-gushing investment vehicle
Today, let’s talk about the biggest no-brainer investment idea of the next 30 years.
It’s a simple market approach that will help you earn huge income streams for decades, without you having to trade in and out of stocks, time the markets, or do anything complicated.
In fact, the more sloth-like you are, the better. That’s because the benefits of this strategy increase in direct proportion to your patience. It’s “set it and forget it” investing at its finest.
But when you get this right, then give your investment time to develop, you’ll have set yourself up to enjoy a massive passive income stream that’s virtually guaranteed.
That’s because what’s driving this investment idea is a huge tailwind … a gale-force tailwind. It’s a demographic reality that’s reshaping our society — and will continue to over the coming decades — regardless of whether you’re invested alongside it or not.
But let’s make sure that you are.
So, forget the trade war. It’ll still be here tomorrow. Brush off your concerns about the Fed and its policy decisions until some other time. Instead, let’s talk about investing wisely for the long-haul. Get this right today, and your finances of tomorrow will be far, far more secure.
***To get the best returns, all we have to do is invest today where the money will be tomorrow
So, where will that be?
At the cross-section of where an aging U.S. population with increasing healthcare demands meets a tax-advantaged investment vehicle that’s designed to churn out cash.
In other words, healthcare and assisted-living REITs that service our Baby Boomers.
Whether for yourself, your children, or for your grandchildren, this is probably the easiest, most guaranteed way to create huge income streams over the coming decades. That’s because the demand for this product is going to be off-the-charts … and only increasing.
Let’s look at some numbers …
10,000 Baby Boomers are retiring every day (hitting 65 years of age).
Right now, that means there are roughly 40 million Americans aged over 65. That’s about 13% of the population.
By 2050, that number will more than double to around 88.5 million.
Source: U.S. Department of Housing and Urban Development
But let’s narrow in …
Of our elderly population, about 5.7 million Americans are over age 85. By 2050, this number will more than triple to 19 million. And a full 50% of them will need assistance with daily functioning which, in most cases, means an assisted-living facility or a skilled nursing home.
The cost for those services can run anywhere from $60,000 to $180,000 per year.
***This is going to place enormous financial strain on our seniors, and massive operational strain on our healthcare system
Also, keep in mind, with better healthcare, the Baby Boomers can expect to live far longer than their parents and grandparents.
Even right now, elderly people are the biggest consumers of healthcare resources. Reports suggest they comprise 35% of all hospital visits … 38% of emergency medical responses … 90% of nursing home care … and 34% of prescription usages.
These huge numbers make more sense when taking into account that around 60% of Boomers have been diagnosed with either arthritis, diabetes, heart disease, and/or hypertension. In other words, there’s a monsoon wave of Boomers heading toward hospitals, medical centers and aged care homes.
The bottom line: we have a massive and growing demand for health-related services for our Boomers. This will include retirement communities, assisted living facilities, nursing homes, and mixed-use planned communities that market, in part, to senior citizens.
***Enter REITs, a tax-advantaged investment vehicle that’s specifically designed to churn out cash
REITs (real estate investment trusts) are businesses that own income-producing real estate in all sorts of real estate sectors — think single family homes … apartments … offices … and yes, healthcare related properties.
Most REITs own dozens of properties in different geographical areas. For example, the big shopping mall REIT Simon Property Group owns hundreds of malls across America. The big office REIT Boston Properties owns over 150 office buildings across America. The big apartment REIT Equity Residential owns over 70,000 apartment units across the country.
You know how ETFs allow investors to own big groups of stocks with just one click in a brokerage account? You can think of REITs like ETFs for properties.
To be considered a REIT by the government, a company must pay out at least 90% of its taxable income to its shareholders. This means that REITs can be a great source of cash-flow for investors like you and me.
***REITS offer investors lots of benefits that don’t come when owning a single stock
For example, there’s greater diversification (since you’re investing in many properties all at once) … more price stability (you rarely see huge price swings in quality REITs because real estate isn’t a volatile investment like a high-flying tech stock) … and of course, the greater yields — which is what’s driving the wealth creation in this case.
As mentioned a moment ago, to qualify as a REIT, these businesses must pay out at least 90% of taxable income to shareholders. This usually means fat dividend checks.
For example, according to Nareit (National Association of Real Estate Investment Trusts), the average REIT dividend yield is currently 5.44%. Compare that to the average dividend of the S&P 500 — currently 1.86%.
But that’s just the start. Many healthcare REITs offer greater yields. It’s not uncommon to find them upwards of 7%, 8%, even 10%.
For instance, Global Medical REIT currently yields 7.5%, MedEquities Realty Trust yields 7.6%, and Sabra Health Care yields 9.2%.
Let’s put this into perspective …
Say you made two investments. Investment A is $25,000 put into the S&P 500, yielding 1.86%. You’re going to reinvest your dividends.
Investment B is a healthcare REIT yielding 7.5%. You’ll also be reinvesting your dividends.
After 20 years, how do the returns of these two investments compare?
Assuming there’s been zero capital appreciation, the S&P 500 investment has climbed from $25,000 to $36,142. That’s 45% higher — and remember, those gains have come through nothing other than reinvesting dividends.
But now, look at how your healthcare REIT performed …
The 7.5%-yielding REIT grew from $25,000 all the way to $106,196. That’s a gain of over 325% — from dividends alone.
But with Boomers retiring in such numbers that demand for medical-related properties will be skyrocketing, why would we assume our returns will only come from dividends?
***In fact, if you look at REITs historically, their compound rate of return beat all other sectors
Does that surprise you?
If you take five major asset classes: U.S. stocks, international stocks, long-term government bonds, Treasury Bills, and REITs, and compared their compound rate of return since 1972, REITs win out.
Below is a chart from the research firm Morningstar comparing returns for these asset classes from 1972 through 2017. It assumes a hypothetical investment of $1 in each asset class in 1972.
As you can see, REITs returned the most, leading the way with a compound annual return of 11.8%.
Remember our hypothetical $25,000 investment from a moment ago? Had we invested it in a basket of REITs yielding 11.8% for 47 years (from 1972 until today in 2019), we’d be sitting on a staggering $4.7 million portfolio.
Given this immense wealth-building power of REITs, smart investors often use them as the cornerstones of portfolios. In fact, here at InvestorPlace, our own Louis Navellier, Matt McCall, and Neil George all have REITs in their various portfolios.
***The “one decision” investment — buy it and never sell
The “one decision” investment is sort of a Holy Grail for rich, sophisticated investors. The goal here is to buy high quality assets and never sell them … and simply enjoy their appreciation in value and substantial cash flows for decades. No “fast money” trading. Just the safe, secure, reliable building of wealth.
For example, in the wake of the 2008 financial crisis, most REITs were deeply depressed. People were worried the Second Great Depression was upon us.
But say you were a savvy investor who realized what a tremendous opportunity this was, so you purchased the healthcare REIT, National Health Investors (NHI).
In February of 2009, you could have purchased it for about $24. And at that time, it paid a quarterly dividend of $0.55. That equated to a dividend yield of 9.1%.
Fast forward to today. NHI has a market price of about $78.
Now, sure, going from $24 to $78 is a nice return of about 225%, but let’s focus on something else …
Over the last ten years, NHI has raised its quarterly dividend from $0.55 to $1.05.
At your original purchase price of $24, this means that your current dividend yield based on your original investment would be 17.5%.
We’re not at 2009 lows right now, but the massive demand for healthcare related properties and services is going to drive this sector higher for decades. And if you have any doubts, consider this — what do you think our government is going to do if seniors begin to have trouble with assisted living services?
The government will all but backstop healthcare and assisted-living services for these folks. It would be political suicide to suggest cutting support for programs related to this.
Now, where that money will come from, and how we will repay it is a different Digest — but spending money it doesn’t have has never been an issue for our government.
***Taking a step back, I was talking recently with our CEO, Brian Hunt, about this opportunity
He told me:
Jeff, if you held a gun to my head and made me invest in just one investment theme for the next 30 years, I’d probably pick “sell healthcare and assisted-living services to Baby Boomers.” Let others speculate on long shots. I’ll take the guaranteed big money.
All we’re doing with healthcare-related REITs is investing alongside demographics and demand, using REITs, which have historically been a major money-maker. It’s hard to argue with that combination. Our own Neil George, editor of Profitable Investing, has healthcare REITS on his radar and in his portfolios. On of his favorites has been posting amazing numbers.
From Neil’s March update:
Over the past ten years, this REIT has delivered a total return of 981.71% for an average annual equivalent of 26.87%. It is a disciplined company when it comes to debt and leverage as its debt to capital is at only 47.00%. This provides the ability to easily service its current debts and provides eased access for credit to fund additional acquisitions.
It is also still a good value. The REIT is valued at only 1.49 times its book value of all of the healthcare properties in its portfolio.
If you’d like to learn more from Neil, click here. At a minimum, take some time to consider healthcare REITs as a part of your portfolio. Over the next few decades, this will be as close to “layup” investing as you get.
Have a good evening,