Alternative income investments have become increasingly popular among investors looking to diversify their portfolio and generate additional streams of income. In this post, we’ll take a closer look at five types of assets that are commonly used for alternative income investments: MLPs, REITs, dividend ETFs, covered call ETFs, and bond ETFs.
MLPs (Master Limited Partnerships)
MLPs are tax-advantaged investments that are typically involved in the energy industry. MLPs are structured as partnerships, which means that investors receive distributions of the profits generated by the partnership. MLPs are known for their high yields, with some MLPs offering yields of 8-10% or more. However, it’s important to note that MLPs come with unique risks, including exposure to commodity prices and interest rate fluctuations.
REITs (Real Estate Investment Trusts)
REITs are companies that own and operate income-generating real estate assets, such as shopping centers, office buildings, and apartment complexes. REITs are required by law to distribute at least 90% of their taxable income to shareholders, which means that they often offer high yields. REITs can be a good option for investors looking for exposure to real estate without the hassle of owning physical properties.
Dividend ETFs are exchange-traded funds that invest in stocks with high dividend yields. These ETFs offer investors exposure to a diversified portfolio of dividend-paying stocks, which can help to reduce risk. Dividend ETFs can be a good option for investors looking for regular income payments without the hassle of picking individual stocks.
Covered Call ETFs
Covered call ETFs are ETFs that use a strategy known as covered call writing to generate income. In a covered call strategy, the ETF buys a stock and then sells call options on that stock. The income generated from selling the call options can help to offset any losses in the stock price. Covered call ETFs can be a good option for investors looking for income and downside protection.
Bond ETFs are ETFs that invest in a diversified portfolio of bonds. Bond ETFs can offer investors exposure to a wide range of bond types, including government bonds, corporate bonds, and municipal bonds. Bond ETFs can be a good option for investors looking for steady income payments and a lower level of risk than stocks.
In conclusion, alternative income investments can be a valuable addition to a diversified portfolio. MLPs, REITs, dividend ETFs, covered call ETFs, and bond ETFs are just a few examples of the many options available to investors. As with any investment, it’s important to do your research and understand the risks before investing.