[Opinion] Finance That Collects Monthly Rent Like a Building Owner

At one time, the dream of retirees was to become rental property owners. Regardless of the amount of wealth, receiving monthly rent was considered the best retirement preparation. It is still true that real estate in good locations with no missed rent payments remains a good means of preparing for old age. However, if vacancies occur, the owner must bear various costs, and property taxes must be paid annually. There seem to be several reasons why the preference for monthly rent was strong for a long time in the past. There simply were no suitable investment targets. Assets that generate steady monthly rent were almost exclusively real estate. Stock dividends are mostly quarterly at best, and monthly payout financial products were unsatisfactory in terms of returns. Another factor to mention is the issue of stability. What determines the long-term value of an asset is the cash flow it generates. That cash flow must be somewhat predictable. In other words, it must be a belief in predictable cash flow, but such products were very rare.

Now the world has changed. Various investment instruments with relative stability have emerged. A representative example is monthly distribution Exchange-Traded Funds (ETFs). Monthly distribution or monthly payout ETFs are products that pay out cash monthly, sourced from dividends, interest, rent, option premiums, and so on. It is possible to invest overseas in countries like the U.S. and Japan, and the investment targets include stocks, bonds, real estate, and more. Costs are also low. As competition has intensified, fees have dropped, allowing investors to create monthly cash flows using multiple ETFs at low costs below 1%. Especially retirees or those approaching retirement need to pay more attention to monthly payout ETFs.

The value of cash flow increases with age. Since earned income or business income decreases or disappears, cash flow generated from assets inevitably becomes more precious. It is often said that 1 million won when young and 1 million won when old have different values. As one ages, financial planning should focus more on the cash flow generated from assets rather than the size of the assets, and monthly payout ETFs can be a useful tool for this.

Volatility also needs to be considered. Investing in assets with excessively high volatility is not comfortable as one gets older. Relatively lower volatility is preferable. For example, assets with steady cash flows such as dividends tend to have relatively low volatility. Steady cash flow and low volatility are attractive points for investors seeking stability. From a withdrawal strategy perspective, the utility of monthly payout ETFs is likely to increase. After retirement, one must withdraw money from accumulated assets starting at a certain point. The problem is that if you only withdraw, the money runs out too quickly. Assets that generate cash flow and, even if not high returns, have potential for growth in returns are needed. ETFs investing in U.S. dividend growth stocks or dividend aristocrats, which are currently popular among investors, are representative products with such characteristics.

The core of retirement planning can be summarized in one phrase: "Ensure that your cash flow does not dry up until you die." Creating your own cash flow portfolio using various assets is an important task that investors preparing for old age must learn, practice, and master.

Lee Sang-geon, Head of Investment and Pension Center, Mirae Asset

This content was produced with the assistance of AI translation services.