Wealth Outlook 2024 - Slow then grow

Glossary 134 investor’s perspective, a key advantage of munis is that their yields are exempt from federal and (in some cases) state income taxes. This can make their “tax equivalent yield” highly attractive, especially for people in high tax brackets, and even more so for those who live in high-tax states (provided the issuer is from the investor’s home state). The Bloomberg US Municipal Index covers the USD-denominated long-term tax-exempt bond market. The index has four main sectors: state and local gener- al obligation bonds, revenue bonds, insured bonds, and pre-refunded bonds. Preferred stock , or “preferreds,” is a form of stock that acts almost like a bond. Investors who buy them are usu- ally offered a fixed dividend payout on a set schedule for as long as they own those shares, which offers somemore predictability than standard dividend-paying common shares. But there are also downsides: dividend payments can be deferred if the company has a financial hardship; the shares come with no voting rights; and while the shares trade on an exchange as common shares do, most companies don’t issue preferred stock so the total market for them is small, and liquidity can be limited. Private credit investing , a subset of private equity, is an asset class definedby non-bank lendingwhere the debt is not issued or traded on the public markets. Private credit can also sometimes be referred to as "direct lending" or "private lending". Private credit covers a wide variety of strategies that span the capital structure and borrower types – from senior secured loans for blue-chip corporate borrowers to special and distressed situations. Different private credit comes carries different risk/reward based on the seniority of the loans. That said, private credit can be a good complement to fixed-income strategies, offer- ing potential incremental income, resilience, enhance- ment of returns, and diversification. Private equity is an alternative investment class which in its simplest form is the capital or ownership of shares not publicly traded or listed on a stock exchange. Private equity generally requires investors to make a longer-term commitment, but in exchange may offer an “illiquidity premium” – that is, the potential for elevated returns. Pri- vate equity’s characteristics are often driven by those for DMsmall-cap equities (which, after all, tend to be the size of company bought by a private equity fund), adjusted for illiquidity, sector concentration, and greater leverage and can include secondaries, buyouts, growth, venture capi- tal and co-investments. Real assets have a tangible form and intrinsic worth be- cause of their properties and substance. The assets can include preciousmetals, commodities, real estate, equip- ment, and natural resources. They can be good diversifi- ers for a portfolio because of their somewhat low correla- tion to financial assets like stocks and bonds. In contrast, commodity futures, exchange-traded funds (ETFs), and real estate investment trusts (REITs) are financial assets whose value depends on the underlying real assets and thus are not quite “real.” Real estate investment trust (REIT) is a corporate enti- ty that either has the bulk or all of its asset base, income and investments related to real estate. In the US, under Security and Exchange Commission (SEC) guidelines, for an entity to qualify as a REIT at least 90% of its taxable annual income to shareholders in the form of dividends must be fromreal estate. While typically REITs are publicly traded, not all are, as public non-listed REITs (PNLRs) can register with the SEC as REITs but do not trade on major stock exchanges. REITs are subject to special risk con- siderations like those associated with the direct owner- ship of real estate. Real estate valuations may be subject to factors such as changing general and local economic, financial, competitive, and environmental conditions. REITs may not be suitable for every investor. Dividend in- come from REITs will generally not be treated as qualified dividend income and therefore not eligible for reduced rates of taxation. Real estat e classes include Equity REITs (US REITs and publicly traded real estate companies) not designated as Timber REITs or Infrastructure REITs: NAREIT US REIT In- dex, NAREIT Canada REIT Index, NAREIT UK REIT Index, NAREIT Switzerland REIT Index, NAREIT Euro-zone REIT Index, NAREIT Japan REIT Index, NAREITHong Kong REIT Index, NAREIT Singapore REIT Index, NAREIT Australia REIT Index. Small- and mid-cap (SMID) stocks unite the fast- er growth of small companies with the higher quality of mid-size firms so investors can gain access to a more re- silient and less volatile collection of growing stocks. In the Wealth Outlook 2024