Top 10 Investments with High Returns
One of the main reasons why investing is such an appreciated art is due to the fact that it requires a skill of balancing between the risk and the reward. The higher the risk, the higher the reward and vice-versa, however, there are a lot of people who just can’t resist the urge created by their own greed. Just because you want a high return, this doesn’t mean that you absolutely have to go with the most volatile stock, bond or enterprise that you can find. In order for your investment to be a business decision and not an impulse of a passionate gambler, you need to figure out how to recognize the safest of these high-returns investments. Here’s a list of top 10 such investments that should help you figure this one out.
1. High-yield money market accounts
The simplest way to describe a high-yield money market account would be to say that it’s an account with higher interest rates but the one that requires monthly maintenance fees. Keep in mind that this is something that can pay off if you plan to save money in the long-run. On the other hand, if you intend to raise the money in the nearest future, you might want to look for alternatives. One more perk is the fact that you get to write a certain number of checks on a monthly basis each month. Furthermore, this savings method is more flexible than a traditional savings account, which is a huge plus on its own. The reason why this is so safe is due to the fact that the money is FDIC-insured.
When it comes to knowing what to look for when choosing an account, you need to inquire about the interest rate, the required initial deposit and minimum balance required for the fee. Other things you should definitely pay attention to is the fees (which we’ve already mentioned) and any potential links to other banks and brokerage accounts. Sometimes, there are limitations to linking multiple accounts and this is something that’s definitely worth checking out ahead of time. Once you have this all figured out, all you have to do is inquire about the logistics of opening a high-yield money market accounts and there you have it.
2. Government bond funds
Speaking of mutual funds that invest in debt securities one must not overlook. The reason why they are so amazing is due to the fact that they’re incredibly low-risk. In other words, if you’re aiming for a means of improving your cash flow. One more thing that you might find quite satisfying is the fact that this money goes towards supporting practical projects. Sure, not everyone is concerned with the ethics behind their investment but it’s definitely a nice touch. It’s a way to help the local community and grow your wealth at the same time.
There are, however, some disadvantages worth being cautious about, as well. First of all, there’s the interest risk rate. Once you purchase a bond, the interest rate can be locked for anywhere between 10 and 30 years. In other words, if the interest rate skyrockets dramatically, you’ll be stuck with an investment that’s significantly below the market value. Nonetheless, this is only relevant if you plan to sell the bond before maturity.
3. Short-term corporate bond funds
Investing in corporate bonds is another interesting notion. However, these bonds fall into three different categories according to their maturity. There are short-term notes (under five years of maturity), medium-term (under twelve years of maturity) and long-term bonds (those that exceed 12 years of maturity). The main perk of these bonds is the fact that they have a somewhat higher growth potential than the above-discussed government bonds. They are also more resilient to inflation and interest rates. Lastly, they’re outstanding for diversifying your portfolio.
The truth is that corporate bonds tend to be somewhat riskier than their counterparts but, for this very reason, they earn you a bit more interest. Fortunately, if you do your research and invest in corporations that are in a safe spot (financially), the risk is definitely minimized. Investing in some of the titans of the industry is probably your safest bet because these are companies that are highly unlikely to be toppled in the nearest future (even with all the present occurrences).
4. Investing in a franchise
Investing directly towards small business, a startup or starting your own enterprise is always the option with the highest return. The biggest problem with this, however, lies in the fact that investing in a single enterprise can be quite risky. The simplest way to minimize this risk is to consider franchising. According to all the market research sessions, franchises are more resilient than independent startups for a series of reasons. Most importantly, an entrepreneur is taking on a proven system, while working for themselves (which gives them an extra layer of insulation).
The main reason why startups fail so easily is the fact that they enter the industry in which they 1) have no recognition and 2) lack expertise. The majority of franchisors tend to make up for these shortcomings in various ways. First of all, they have their brand reputation to stand behind this first-time entrepreneur. Second, they offer guidance, coaching and advice. Every now and then, they also provide the franchisee with some of their contacts like valuable associates, suppliers and so on.
5. Dividend-paying stocks
It goes without saying that dividend-paying stocks are somewhat riskier than the majority of their above-listed counterparts. The reason why they are so popular and the reason why they’re considered to be high-return is due to the fact that they offer regular returns, regardless of what goes on in the market. Think about it this way, if you’re looking to diversify your portfolio and are trying to ensure that the cash keeps flowing, there’s nothing quite like dividend-paying stocks. The simplest way to describe them would be to say that they’re regular cash payments to the shareholders of the corporation in question.
The problem, nonetheless, lies in the fact that you’re at the mercy of the success or failure of the company. The value of your investment is tied to that one company’s performance. Ideally, you would look for companies with the longest history of financial stability. This way, you can ensure lower volatility of your business. It also goes without saying that these top-tier companies tend to be quite expensive to invest in (even though they are your safest bet). While higher volatility usually means a higher return, what you’re looking for is a smart investment, not a gamble that has a chance of paying itself off several times over.
6. ETFs
The exchange-traded funds (ETFs) are one of the most popular investment vehicles that are particularly favoured by first-time investors. Why? Well, the first of many reasons is the fact that they usually start with a small amount of capital and it’s the ETFs that are the most favourable under such conditions. Even with a relatively low amount of money invested, with ETFs, you have the option of diversifying your portfolio. This provides you with that one extra layer of insulation that the majority of young investors usually lack. In other words, it puts a first-time investor ahead of the curve.
Other reasons for going with ETFs as your tool of choice are quite compelling, as well. First of all, there’s the issue of transparency. When you’re a committed investor, the last thing you want is to be kept in the dark. This is where the transparency that the majority of ETFs practice comes to be a major advantage. Aside from this, buying and selling ETFs can be done through an online brokerage or a trusted investment firm. For someone who’s new at all this, the relief that comes from these simplified logistics is just huge.
7. Rental housing
For those who are serious about making a passive source of income, rental housing is one of the best propositions that you’ll ever hear. Why? Well, because great residential rental homes tend to return anywhere between 1 and 2 per cent of their total value every single month. For those who are interested in commercial rental properties, the return rate is between 4 and 5 per cent per year although the investment is much steeper. The thing, however, is not as simple as it seems.
First of all, you need to find a great rental property manager. Once you have this person on your side, you need to examine these properties and see if there’s any additional work to be done here. The most important thing worth keeping in mind is that your worst fear is a vacancy. This is why running rental housing requires people skills, as much as it does logistical management. Persuading people to come and stay, nurturing tenant loyalty and not being afraid to go above and beyond to be a great landlord is just the tip of the iceberg.
8. Real estate crowdfunding
The biggest obstacle in entering the rental or commercial property market is a steep entry fee. Chances are that you don’t have enough money to construct a major residential complex or commercial property on your own. This is why real estate crowdfunding might be just the thing to get you started. Real estate crowdfunding is a concept that requires multiple parties to pool their money together in order to complete a project (or multiple projects).
The biggest perk of this approach lies in the fact that, once the project is completed, you get your fair share without having to manage the property (or even own it in its entirety, for that matter). This strategy is incredible since it decreases the risk and gives you returns that are… well, more predictable. In other words, it’s one of those rare low-risk high-return strategies but you still need to have the necessary capital in order to start out on this path.
9. Mutual funds
Another option for those who are afraid that they don’t have enough funds for a significant independent investment is to look for a decent mutual fund. This is probably the single cheapest way of diversifying your portfolio. Also, this is a method that is most commonly used by those who have long-term goals that they’re saving towards. We’re talking about people looking to save for their retirement, etc. The initial cost may vary between funds but the minimum can be as low as $500. This means that the lack of capital isn’t an excuse and that you can start forming your portfolio as early as this afternoon.
10. Peer-to-peer lending
Finally, the concept of peer-to-peer lending is definitely something worth your full and undivided attention. It’s a concept where investors directly lend money to the parties in need. The majority of peer-to-peer lending platforms also allow you to choose the level of risk for the loan that you’re lending out. If, for instance, you decide to lend the money to a person with a sterling credit score, you will get a lower return rate but will be able to rest assured, knowing full-well that the money that you’ve invested is in safe hands. The lower the credit score, the higher the interest and the bigger your return will be.
In conclusion
At the end of the day, there are few more things worth taking into account. First, no investment, regardless of how safe is 100 per cent fool-proof. This is why you need to diversify and you need to do so as much as possible in order to ensure that you have returned in years to come. Second, even though some investments tend to offer high returns, you have no way of knowing the exact numbers. The investment industry is an ever-shifting landscape. Everything is fluid and you need to be aware of that. Finally, you shouldn’t invest the money that you need for day-to-day expenses (either personal or for your enterprise). This role is reserved for the funds that you can afford to keep dormant for a longer period of time.