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Legitimate 9% Yields in a Zero-Percent World

By Dr. Steve Sjuggerud
Monday, April 10, 2017

"I've got a good retirement plan... I just don't have a good plan for retirement," my cousin told me a few weeks ago at lunch.
He's a smart, hardworking guy... a big-shot executive for a Fortune 500 company (though he would never describe himself that way).
He has a good retirement plan from his company. But what should he do so he can live on his savings?
He needs income. And today, I'll share one way to get it. This investment offers a legitimate 9% yield in today's zero-percent world.
Let me explain...
My cousin is not alone.
That same week I spoke to him, I saw my mother-in-law (who is in her 70s)...
She said to me, "Steve, I love reading about all your investing ideas. But I'm getting too old for that speculative stuff. Can't you write about income for us? That's what we need!"
She's right. So my research team and I recently dug in to answer one simple question: What is the highest-yielding, safest investment out there today?
It turns out that the best place for safe, high yields today is what I call "virtual banks."
These are probably the best high-yield investments that most investors have never heard of.
So what does a virtual bank do?
It does the same basic thing that a traditional bank does – but with no brick-and-mortar branches, no tellers, and no walk-in customers.
A virtual bank borrows money at a low interest rate and lends it out at a higher one. The collateral for its loans is real estate.
Sounds like a regular bank, right? But it can deliver higher returns, more safely.
I've recommended these several times in my career, with great results...
•   In March of 2002, I recommended a virtual bank called Annaly Capital Management (NLY) in my True Wealth newsletter. We closed out the trade in early 2005 for a 55% total return.
•   In the September 2008 issue of True Wealth, I recommended a virtual bank called Hatteras Financial (which has since been bought by Annaly). We closed out the trade in December of 2009 for a 68% total return. (Yes, that was a 68% total return, in 15 months.)

In hindsight, those were some great buys!
With their high yields, virtual banks offer a lot of income potential. And if our buy is timed well (like they were in those two examples), then the total return can be amazing, too.
Right now, you can earn a healthy dividend yield from this idea...
You can spread your risk across a basket of virtual banks by buying the iShares Mortgage Real Estate Capped Fund (REM). This exchange-traded fund offers a legitimate 9% yield in a zero-percent world.
If you're looking for income, consider virtual banks today.
Good investing,

Further Reading:

DailyWealth classic: Longtime readers know Steve has been a fan of "virtual banks" for years. In this essay, he takes a look at one of the leaders of the pack. "It's not 'sexy,'" he writes. "But it can make you rich..." Read more here: The U.S. Government Is Offering a Safe 60% Gain in Two Years.
"Investors who want to make consistent returns from stocks need to focus on dividends... and relentless dividend-growers," Dave Eifrig writes. In this essay, he explains the best way to harness rising dividends for a stream of income that rarely goes down. Learn more here: The No. 1 Thing I Want From an Investment.

Market Notes

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Cheesecake Factory (CAKE)... chain restaurants
Panera Bread (PNRA)... chain restaurants
Constellation Brands (STZ)... beer and wine
National Beverage (FIZZ)... soft drinks
SodaStream (SODA)... do-it-yourself soda
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eBay (EBAY)... online auctions
Amazon (AMZN)... online retail
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Microsoft (MSFT)... software
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Align Technology (ALGN)... invisible orthodontics
Baxter (BAX)... medical devices
Eli Lilly (LLY)... pharmaceuticals
LabCorp (LH)... medical testing
Monsanto (MON)... seeds and pesticides
Weyerhaeuser (WY)... timberland
NVR (NVR)... homebuilder
Fastenal (FAST)... tools
Energizer (ENR)... batteries

First Solar (FSLR)... solar power
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Valeant Pharmaceuticals (VRX)... Bill Ackman's disaster
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Bed Bath & Beyond (BBBY)... home-goods retailer
General Mills (GIS)... Betty Crocker, Pillsbury, and more

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