A well-crafted watchlist is critical to smart investing: It can help you find attractive buying opportunities, and it can save you from rushed, emotional decisions by slowing down the process. The Fool now offers MyWatchlist.com, your free customized hub to follow the performance and Fool news and commentary about the companies you're watching.
But what to put on your watchlist? In the latest entry in our ongoing series, Fool analyst Ilan Moscovitz shares three real estate investment trusts he's been watching.
Two to watch
Generally speaking, Ilan is a fan of REITs today. They historically have had low correlation to other asset classes, moving in different directions than bonds and other types of stocks. That means that these investments potentially offer a way to capitalize on the economic downturn. REITs have made money in five of the nine years that the S&P 500 posted a negative return since 1972. Though that trend didn't stick during the recent recession, over the past decade, the Vanguard REIT Index fund posted an average annual return of 10.4%, compared with an average annual loss of 1% for the S&P 500, according to the Fool's Rule Your Retirement newsletter service. And the fact that REITs don't pay taxes as long as they distribute at least 90% of their income as dividends is an attractive benefit.
The first REIT Ilan looked at was Anworth Mortgage Asset
The same was true for Chimera Investment
And one he bought
But nearby, Ilan found a REIT on his watchlist that he felt was the best bet as the first purchase in his Rising Stars portfolio. Annaly Capital Management
"And it's one that's likely to persist for some time," he w rote. "As it's exceedingly unlikely we're going to see any meaningful economic stimulus to address unemployment emerge from the soon-to-be Republican-controlled House of Representatives and dysfunctional Senate, we can expect the slump -- and low interest rates -- to continue for some time. Traditional monetary rules prescribe as many as four years (!) of near-zero percent interest rates to cope even with mainstream economic forecasts." Based on that, Annaly made the jump from Ilan's watchlist to his portfolio, where it will reward him with a hefty yield -- currently above 15%.
And that's exactly why it pays to watch. You can make smarter investing decisions with your own version of My Watchlist, new and free from the Fool. Click below to start following one of the stocks mentioned above:
Roger Friedman doesn't own shares of any companies mentioned, but they're all now on his watchlist. The Fool owns shares of Annaly Capital Management. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.