Trust in your trust

There are many different vehicles available to investors seeking to build wealth, consolidate their financial position or bankroll a comfortable retirement. When it comes to asset allocation, a host of factors contribute to the decision-making process, including age, family commitments, income and the individual’s appetite for risk.

As with all investments, there is a risk of loss. Already we’ve seen high-risk, high-reward vehicles such as cryptocurrencies take a bath in the opening three months of this year, stripping speculative investors who bought in at the turn of the new year of more than 50 per cent of their investment.

The stock market has always been a popular place for investors to chase returns. While the Australian Securities Exchange (ASX) performed strongly in 2017 with an impressive 13 per cent return, values have fallen in 2018, with the market suffering significant shocks along the journey. In fact, the ASX had its worst day of trading in over 18 months in February, with more than $30 billion wiped off its total value in a session. From financial stocks to energy and materials, no market sector was spared.

This type of volatility, where market prices change rapidly and unpredictably, can hurt an investor’s financial position, sometimes to the point of no return.

For those looking for alternative ways to build wealth, a couple of options include unlisted property trusts and mortgage trusts – asset categories that continue to attract significant interest from investors.

Unlisted property trusts are popular with those managing their own superannuation. In fact, it is the third most popular asset class for SMSFs behind shares and cash, with roughly 10 per cent of all holdings in unlisted property trusts, according to Canstar.

Mortgage trusts are also coming to the fore as an investment of choice. Money is pooled for lending to borrowers as mortgages over Australian property and investors buy from a limited pool of ‘units’. Income is distributed monthly on a per unit basis.

According to the latest SQM Research data, the mortgage trust sector has doubled in the past 12 months – a clear indication investors are appreciating the stability and added benefit of monthly cash flow.

Trilogy is a boutique fund manager well regarded for the performance of its trusts. The Trilogy Monthly Income Trust distributed 7.69 per cent a year for the month of March.

Mortgage trusts are popular with investors seeking more reliable returns over the longer term.

For many investors it’s important their portfolio is generating a monthly income, whether it be to accelerate debt repayment or fund their lifestyle choices.

Property trusts and mortgage trusts suit investors looking for regular distribution of income value over time.

As with all investments, there are no guarantees, but in a low-yield environment, mortgage trusts offer a viable option to investors who still want to see a great return on their investment dollar.

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