Which would you rather depend on during retirement: corporate profits from blue-chip companies or the rental income and capital gains from the US housing market?
That’s a tough call, so let’s dive into how we can best position ourselves to earn passive income from these major capital markets.
Building passive income during retirement should be your goal during your working years. Some people love to tinker with their portfolios, reading stock and housing news daily.
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Others would rather turn their money over to the professionals. Freeing up your time is the appeal of dollar-cost averaging into exchange-traded funds (ETFs) and Real Estate Investment Trusts (REITs).
The power of income. Dividend ETFs focus on investing in large, stable blue-chip dividend-paying companies like Altria (MO), Cisco (CSCO), IBM (IBM), and Verizon (VZ).
Real Estate Investment Trusts are businesses whose sole purpose is to extract income from the housing market by lending, purchasing mortgages, and owning properties.
Fundrise is a unique REIT that does not trade on the stock market. You invest your cash directly through their website (affiliate). Sometimes, they even offer a way to invest directly in their company through purchasing and owning private shares.
The best way to invest in Dividend ETFs and Fundrise is to dollar-cost average into them over a long time.
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Eventually, you want your massive portfolio to have substantial capital gains and produce a large dividend income stream. Which security provides the best way to get there?
Dividend ETFs provide diversity. The greatest advantage of dividend ETFs is that they provide a ton of variety. My favorite dividend ETFs are Schwab US Equity Dividend (SCHD) and WisdomTree US Dividend (DHS).
Dividends ETFs are usually passive, meaning they don’t have a fund manager overseeing daily trades. However, they create a stringent index to filter businesses by dividend payment streaks and company size.
Dividend ETFs prevent investors from having to choose individual dividend stocks, which can be risky.
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However, dividend ETF investors can miss out on some upside in investing in individual stocks, such as special dividends, mergers, stock splits, and spin-offs.
Dividend ETFs provide a simple way for people to become dividend growth investors (DGI). By investing in SCHD or DHS over the long haul, investors capture the gains of massive US corporations and their dividend growth.
Always bet on the US housing market. For most people, their greatest chance to obtain wealth is their primary residence.
The housing market has been a wealth generator for many Americans, so why not put your faith in its future?
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REITs aim to own properties to collect rental income and passively build equity. Over the years, rents and prices increase, which trickle down to investors.
Fundrise also provides diversity, although it concentrates on the housing market. Investing in real estate has many paths, such as commercial, office, single-family, and apartments.
I have read that Fundrise invests in single-family, apartments, and industrial areas. They are also branching into private equity lending to diversify their investments further.
Fundrise’s main appeal is its transparency and investing options. Also, since it doesn’t trade on the stock market, we can avoid some of the emotional trading madness.
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Fundrise vs. Dividends ETFs. Which security do you choose if you have $400 monthly to invest? As always, your individual situation can dictate your preference.
If you are concerned about taxes, SCHD may be the better option. Blue-chip companies pay corporate taxes, and investors then pay tax on dividends. Therefore, the dividends are qualified, meaning you pay a reduced rate.
Since SCHD invests in these corporations, the dividends are qualified. Depending on your tax rate, you can save a lot of money on taxes.
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However, Fundrise offers a Roth IRA option. These can help alleviate some of your tax burdens but prevent you from collecting juicy dividends until retirement.
If you are an emotional investor, you may want to steer clear of investing directly in the stock market. Many people understand how to invest in a 401K.
However, investing directly in the stock market via a brokerage account can be overwhelming. To invest in the stock market, you’ll need a long-term mindset and focus on income.
Fundrise provides a much more consistent experience. The housing market doesn’t gyrate daily, so that you won’t become too emotional.
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However, the housing market is a long-term investment. Fundrise has made strides in allowing withdrawals quickly, but you are still asking them for permission.
With SCHD and dividend ETFs, you can take your money out within seconds if the stock market is open.
Why not choose both? I love both securities; however, I favor dividend ETFs. I invest in individual dividend-paying companies, so I appreciate what SCHD and DHS provide to my portfolio in the way of diversity.
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I also own three homes. However, I don’t follow the housing market on a daily basis. I am not necessarily a real estate investor; I let Fundrise do the work for me.
Either way, investing in both can be a way to build equity and passive income. They are different enough that splitting resources may be the best option.
I have had a great time investing in both over the years. Fundrise does offer multiple investing options, so I chose the dividend-focused portfolio.
Dividend ETFs also offer monthly paying options, like DHS, that can truly make your income shine. Be sure to read the prospectus on each dividend ETF to ensure you know what you are getting.
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Conclusion. The world of investing is so vast that many people avoid it altogether. In the end, it’s best to keep it simple.
The Fundrise and Dividend ETFs discussion is simply a matter of real estate versus business. Which one do you prefer?
As you become a sophisticated investor, you can diversify into more detailed discussions. I own both securities and will continue to invest accordingly.
Although I invest in individual dividend stocks and own real estate, sometimes it’s a great idea to let the professionals handle it.
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You may get a lower return but also assume less risk, which is great for retirees. During retirement, you want to protect capital as much as possible.
Fundrise doesn’t have a long history, but I have invested since September 2019. Dividend ETFs, especially SCHD, have an excellent track record.
Ultimately, you can’t go wrong with either Dividend ETFs or Fundrise. Some considerations include business, real estate, taxes, and stock market temperament. Good Luck!
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. All Right Reserved Military Family Investing
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