With interest rates still at an all time low and next expected to go anywhere over the next few years, the arena of high return investments while not taking on a lot of risk seems like a figment of the past. I can still remember being a child with a savings account earning 5% or opening a CD in my 20’s and being offered a 6% APR by the banker. Nowadays it seems like you have to take on a lot of unnecessary risks or make some pretty uncertain moves to even think about seeing residual income like that ever again.
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Finding Options for Modest Risk – High Return Investments:
Fortunately returning to the glory days of interest rates aren’t the only safe place in the world we have to look towards if we want high return investments that don’t involve betting the farm. Thanks to the drought in options for safe investments, financial planners are encouraging people to try a lot of other suitable candidates if they want to create their own strategies for passive earning. Here are just a few of the alternative places you can look:
A lot of investors are in love with dividend stocks because you get all the excitement of stock growth while also getting a semi-guaranteed rate of return from the dividend payment. As you know, lots of large cap growth and value companies with solid balance sheets are willing to pay you 2 to 5% dividend payments every year simply for being a shareholder.
Getting paid for simply owning something is not only an incredible form of passive income, but it is also a smart one in terms of protecting yourself against economic downturns. For example, say you own a stock that has a 4% dividend payout ratio. In the good times if the stock grows by 10%, then you’ll really be getting 14% that year. But in the bad times if it goes down by 10%, then you’ll really only lose 6% because you made a positive gain of 4%.
Remember: With all stocks, you always run the risk of losing your principal investment if the market goes down. The dividend payment can help offset that.
High Yield Bond Mutual Funds:
Mutual funds that focus on high yield corporate bonds or municipal bonds are another good option for high return investments. They tend to pay much better higher returns than treasury bonds. And since they are a bond as opposed to a stock, they are fundamentally a form of debt instead of an equity. Translation: Should anything ever go wrong, the legal system would pay back the debtors before the shareholders.
Over the past decade peer to peer (P2P) lending has become one of the leading alternatives to seeking a loan from somewhere other than a bank. Prospectors and people with money to lend can make several small investments in several different loan profiles to candidates they feel are worthy of credit. Depending on which people you decide to invest in and what interest rate you decide to charge, the monthly payments you receive could result in several high return investments that continue to passively trickle in.
One catch: If the debtor defaults, then you’ll unfortunately be out the principal you loaned that person. So choose wisely!
Now that work pensions seem to be a thing of the past, lots of people nearing retirement are turning to annuities to create steady streams of guaranteed income for the rest of their life. The way a basic annuity works is that you take a large sum of money and pay it to the annuity company in return for a pre-determined monthly amount of money for the rest of your life. Annuities are not a new thing; they have been around since the days of the ancient Romans. Today there are many variations of annuities with lots of different kinds of payout terms and levels.
The thing to look out for: Make sure you choose a quality company with very transparent terms and a generous payout plan. You don’t want to turn over your life savings to a company that promises you one thing and then turns out to deliver much less!
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