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If Janet Yellen raises rates in December, it will likely be so the Fed can cut them again shortly thereafter.
It makes sense – official U.S. debt tops $19 trillion (and rising fast). Unfunded liabilities take the total to nearly $127 trillion. Raising rates by just 1% would cost the Fed unfathomably more in additional interest that comes right from the federal budget.
Were it to hike rates, the central bank would cut its own feet off, too. The Fed's bond inventory is so massive, Goldman Sachs estimates it would take a $250 billion haircut on a 1% hike.
So I feel pretty confident that we won't see anything but a token increase – if that – anytime soon.
So, now more than ever, investors need to find a nice, secure source of yield among the slim pickings available; something with the wherewithal to hold up under uncertainty and change.
I'm going to show you the best one I know. And the best part is, its "secret ingredient" is more than powerful enough to overcome any interest rate hike, whether it comes from the Fed or the market.
The income is great, and you'll love the capital gains, too…
This Index Has Outperformed the Rest Since 2001
After the purge of the 2008-2009 financial crisis, real estate has made a forceful and convincing comeback. REITs in particular have done well, with the Dow Jones Equity REIT Index outperforming all other indices since 2001.
One of the largest real estate investment trust (REIT) ETFs around is the Vanguard REIT Index Fund (NYSE Arca: VNQ). The fund tracks the MSCI U.S. REIT Index.
VNQ is naturally well diversified, with 150 holdings covering nearly the entire REIT universe. Its underlying holdings include commercial, retail, residential, retirement housing, and even storage plays.
But despite an attractive performance, VNQ trades pretty rich at a price/earnings (P/E) ratio of 34 while yielding 3.33%.
Instead, I favor a more focused approach that targets the senior housing subsector of the REIT universe.
Senior housing is attractive because yes, we're all getting older. But more importantly, it's the growth in demand that provides the rationale for concentrating on this area.
According to the National Investment Center, "The most prominent demand trend is the growing senior population resulting from the baby boom."
It's forecast that the number of seniors above 75 will continue to swell over the next decade thanks to aging baby boomers. Meanwhile, improving life expectancy should contribute even further to the number of people joining this category.
America's population aged 75+ should increase by 90% by 2030 over 2012 levels, nearly doubling from 6% of the U.S. population to roughly 10%.
That's more than enough to overcome the drag from any rate hike.
And in this category of senior-focused REITs, there's one name that stands out.
About the Author
Peter Krauth is the Resource Specialist for Money Map Press and has contributed some of the most popular and highly regarded investing articles on Money Morning. Peter is headquartered in resource-rich Canada, but he travels around the world to dig up the very best profit opportunity, whether it's in gold, silver, oil, coal, or even potash.