3 Ways for Investors to Play America’s Bulging Home Equity Piggy Banks

InvestorPlace06-13

These three investments are worth considering for those willing to utilize their untapped home equity. Global X SuperDividend (SDIV): It yields over 11%. Ares Capital (ARCC): It is one of America’s ...

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Thanks to the pandemic, Americans are sitting on home equity of $31.79 trillion, up from $6 trillion in 2008, a compound annual growth rate of 11.03%. That’s a tremendous return over 16 years.Carlson estimates that half might be cashable, or $16 trillion that’s sitting in an illiquid asset. One reason is that mortgage rates are high. Secondly, HELOC  rates are also high. Carlson noted his bank charges 8.3% for one. Ouch.The ETF’s top three sectors by weight are financials , energy  and real estate . The top three countries by weight are the U.S. , China","collect":0,"end_time":0,"defaultTopTitle":"investorplace.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4588":"碎股","LU2361044865.SGD":"WELLINGTON US QUALITY GROWTH \"A\" (SGDHDG) ACC","ADX":"亚当斯快递","LU2361045086.USD":"WELLINGTON US QUALITY GROWTH \"A\" (USD) ACC","LU0971096721.USD":"富达环球金融服务 A","ARES":"Ares Management L.P.","BK4135":"资产管理与托管银行","ISBC":"投资者银行","EQR":"资产住宅公司","LU2360032135.SGD":"ALLSPRING GLOBAL EQUITY ENHANCED INCOME \"A\" (SGDHDG) INC","SDIV":"Global X SuperDividend ETF","LU2461242641.AUD":"WELLINGTON US QUALITY GROWTH \"A\" (AUDHDG) ACC","BK4215":"住宅房地产投资信托","LU2125154778.USD":"ALLSPRING GLOBAL EQUITY ENHANCED INCOME \"A\" (USD) INC","BK4585":"ETF&股票定投概念","ARCC":"阿瑞斯","BK4211":"区域性银行","PEO":"Petroleum & Resources Corp","HBCP":"Home合众银行","LU2125154935.USD":"ALLSPRING (LUX) WF GLOBAL EQUITY ENHANCED INCOME \"I\" (USD) INC","BK4195":"互助储蓄与抵押信贷金融服务","LU1363072403.SGD":"Fidelity Global Financial Services A-ACC-SGD","LU2361044949.HKD":"WELLINGTON US QUALITY GROWTH \"A\" (HKD) ACC"},"translate_title":"投资者利用美国不断膨胀的房屋净值存钱罐的3种方式","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"ISBC":1,"SDIV":1,"PEO":1,"ADX":1,"HBCP":1,"EQR":1,"ARCC":1,"ARES":1},"content_text":"These three investments are worth considering for those willing to utilize their untapped home equity. \nGlobal X SuperDividend (SDIV): It yields over 11%.\nAres Capital (ARCC): It is one of America’s largest direct lenders. \nAdams Diversified Equity Fund (ADX): The closed-end fund delivers for shareholders.\n\n\n\n\n\n \n\nSource: Shutterstock\n\n\n\nA Wealth of Common Sense’s Ben Carlson posted an interesting article on his site in early June highlighting how America’s piggy banks are full. Thanks to the pandemic, Americans are sitting on home equity of $31.79 trillion, up from $6 trillion in 2008, a compound annual growth rate of 11.03%. That’s a tremendous return over 16 years. \nCarlson estimates that half might be cashable, or $16 trillion that’s sitting in an illiquid asset. One reason is that mortgage rates are high. Secondly, HELOC (home equity line of credit) rates are also high. Carlson noted his bank charges 8.3% for one. Ouch. \nAlthough HELOCs are expensive right now, there may be a situation where it makes sense to get one. Just a note: I’m Canadian, so my U.S. tax knowledge is limited. Always seek financial and tax advice if unsure about your specific situation.\nStarting in 2018, the interest paid on home equity loans and HELOCs have only been tax deductible for home improvements or repairs. So, if you own your home mortgage-free and have $100,000 cash sitting in the bank, you might consider borrowing the $100,000 to improve your home and take the cash in the bank and invest it in stocks and other appreciating assets. \nYou write off the interest on your HELOC, thereby cutting your outlay on the debt by approximately half while increasing your passive income generated through stocks and bonds.\nHere are three ways to play your idle home equity if you’re comfortable with the risk involved. \nGlobal X SuperDividend (SDIV)\nSource: jittawit21/Shutterstock.comThe Global X SuperDividend ETF (NYSEARCA:SDIV) invests in 100 of the highest dividend-paying stocks in the world. It has monthly distributions for 12 consecutive years. It currently yields 11.3%.\nSDIV was launched in June 2011. It has gathered $768 million in net assets, trading at a slight discount to its net asset value of $21.88. The ETF tracks the performance of the Solactive Global SuperDividend Index, a collection of 100 high-yielding dividend stocks.\nStocks selected must have dividend yields of 6% or higher if they’re not part of an index. If they are, the minimum yield is 3%. They must have a market capitalization of at least $500 million with a stable dividend forecast. On the selection day, the 100 with the highest yields are chosen. Closed-end funds and BDCs (business development companies) are excluded. \nThe index is rebalanced annually on the last business day in February, with quarterly reviews in May, August and November. \nThe ETF’s top three sectors by weight are financials (22.6%), energy (18.9%) and real estate (17.4%). The top three countries by weight are the U.S. (32.5%), China & Hong Kong (18.1%) and Brazil (5.1%). \nIn addition to the risk of using leverage for investments, including home improvements, SDIV has two-thirds of its net assets invested outside the United States. America’s stock markets have outperformed every developed market over the past decade. \nAres Capital (ARCC)\nSource: Pavel Kapysh / Shutterstock.comAres Capital (NASDAQ:ARCC) is one of the world’s largest BDCs with $13.22 billion in net assets. It currently yields 9.0%.\nThe BDC invests primarily in first-lien (46.1% of net assets) and second-lien loans (13.7%) of private middle market companies, with additional equity investments (30.5%) and other debt instruments accounting for the remaining 9.7%. \nAres Capital is one of the largest direct lenders in the U.S. It targets loans of between $30 million to over $500 million, with companies generating annual EBITDA (earnings before interest, taxes, depreciation and amortization) of $10 million to over $250 million. \nThe top three industries by weight are software & services (22.6%), health care services (12.5%) and commercial & professional services (10.2%). The top three regions of its investments are the Western U.S. (24.2%), Midwest (23.8%) and Southeast (18.6%). Investments outside the U.S. account for less than 6%. \nARCC is externally managed by Ares Management (NYSE:ARES), a global alternative manager with $428 billion in AUM (assets under management). It provides its clients with a combination of credit-focused, equity-focused and a combination of the two.\nIncome from this BDC will more than generate enough to cover your interest payments.\nAdams Diversified Equity Fund (ADX)\nSource: Vitalii Vodolazskyi / Shutterstock.comIn the first two investments, I focused on income. However, the important thing here is to generate a total return. It doesn’t matter if it’s income, capital appreciation or a combination of both. The important thing is to deliver a return that is positive. \nAdams Diversified Equity Fund (NYSE:ADX) is a closed-end fund investing in high-quality large-cap companies. Launched in 1929, it has $2.8 billion in net assets invested in 91 holdings. \nThe top 10 ADX holdings represent 37% of its net assets. I’d say that I’d buy all 1o holdings, including the Adams Natural Resources Fund (NYSE:PEO) at 1.8% of the closed-end fund’s net assets.\nIn terms of sector weightings, the top three by weight are technology (29.8%), financials (12.8%) and healthcare (12.3%).\nIf you’re looking for big companies to invest in, ADX’s weighted median market cap is $292 billion, putting it well within the large-cap category.\nIf you want to read a quarterly report worth reading, ADX is it.\n\n“For the twelve months ended March 31, 2024, the Fund’s total return on NAV was 32.6%. Comparable figures for the S&P 500 and Morningstar U.S. Large Blend category were 29.9% and 29.1%, respectively. The total return on the market price of the Fund’s shares for the period was 35.2%,” stated ADX’s Q1 2024 report.\n\nDiscount or premium, ADX has delivered.\nOn the date of publication, Will Ashworth did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.\nWill Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\nSubmit\n\n\n\n\n\n\n\nArticle printed from InvestorPlace Media, https://investorplace.com/2024/06/3-ways-for-investors-to-play-americas-bulging-home-equity-piggy-banks/.\n©2024 InvestorPlace Media, LLC","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.24.0","shortVersion":"4.24.0","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2443018435"}