Unlike bank accounts, these products are not FDIC insured—you can still lose money. That said, you may be willing to take on a little extra risk in exchange for higher rates of return from products that still offer great liquidity and ease of access. If you want to earn a slightly better interest rate than a savings account without a lot of additional risk, your first and best option is government bonds , which offer interest rates from 0. Bonds issued by the U.
Treasury are backed by the full faith and credit of the U. Historically, the U. This makes government debt reliable and easier to buy and sell on secondary markets, if you need access to your cash before the debt is mature.
This stability, however, means bonds may have lower yields than you might earn from bonds where the debt was less likely to be paid back, as is the case with corporate bonds. These bonds —issued by established, high-performing companies—typically offer returns that are higher than Treasuries or money market accounts.
As of June , year high-quality bonds offer average interest rates of 2. Louis Federal Reserve. While high-grade corporate bonds are relatively safe, you can still lose money investing in them if:. Money market mutual funds invest in overnight commercial paper and other short-duration securities. Even the best money market funds typically offer next-to-no yield. Unlike Treasury products and corporate bonds, however, money market funds do offer investors absolute liquidity: They experience virtually no volatility, and you can pull your money out at any time.
Functionally, fixed annuities work a lot like certificates of deposit : You agree to lock up your access to your money for a set period of time, and you get a higher than average interest rate in exchange. As of mid August , fixed annuity interest rates range from about 1. Keep in mind, though, that higher interest rates often come from less well regarded insurers, meaning they are more likely to default on payment. Also remember that, like CDs, you may incur penalties if you need access to all of your money before the maturity date of your fixed annuity.
You will, however, generally receive penalty-free access to a percentage of your money each month. In addition to dividends, you may see your investment grow through a buyback. Recently many companies have been buying back preferred shares, usually at a slightly higher price than they were sold for, because preferred stocks pay higher dividends—and therefore cost companies more—than corporate debt.
Outside of preferred stock, some common stocks are also relatively safe options for those after a higher yield in this low-interest-rate environment. Chief among these are real estate investment trusts REITs and utility stocks, which are historically viewed as safer, less volatile, and more reliable in their dividend payments. Individual equities, like common and preferred stocks or bonds, are not diversified.
You may only buy stock or bonds from one or two companies, making them inherently very risky. What happens if those companies go under? This greatly decreases the risk you take on when you invest while still offering elevated interest or dividend rates. You should always have cash reserves in a liquid savings account that you can tap quickly if necessary. But for money that you need to be somewhat liquid but hope to earn a higher return on, you do have options. Money market funds, annuities, government and high-grade corporate debt are some of the best low-risk, higher-yield ways to grow your money even when interest rates are low.
Napoletano Contributor Forbes adheres to strict editorial integrity standards. A CD account is available at your credit union or bank, and just like a savings account, you can earn interest on money deposited.
Long-term CD accounts pay more than shorter-term ones. If you cash out before the maturity date, you will pay an early withdrawal penalty. Dividends are a form of profit-sharing through which a corporation makes regular payments to its shareholders. Always consider large corporations with a long history of low volatility and financial stability. This means it probably has enough capital stored to deal with market fluctuations.
After identifying a dividend-paying stock , you can buy directly through the company or through a brokerage. A brokerage requires no minimum investment amount. All charge no commissions on trades. Real Estate Investment Trusts REITs are the best way to spend money in the real estate market without investing thousands as a property owner. A REIT not only provides above-average dividends but also gives solid returns over time as property values rise.
Start with research for REITs that purchase property in an area of interest. These are referred to as publicly-traded REITs. Diversyfund is an excellent private REIT to help you build a diversified portfolio while you hedge against market volatility. Invest Now!
Real estate crowdfunding allows you to pool your money together to invest in properties. When a developer identifies an investment opportunity, he or she might not have the ability to fund the investment entirely, so contribute some capital to execute your plan. Should the company go public through an IPO, there may be a huge potential for investment gains.
Crowdfunding real estate has 3 players — a sponsor who identifies, plans and oversees the entire investment, a crowdfunding platform where the sponsor rallies investors and capital and an investor who contributes capital in exchange for a portion of profits accrued by the deal. Corporate bonds provide a predictable financial benefit without sophisticated strategies.
They are issued by large corporations to fund capital investments and business expansions. When you buy corporate bonds, you lend out money to the issuing company. The company then makes a legal commitment to pay interest on your initial capital and refund the principal upon maturity of the bonds.
Corporate bonds offer higher returns than government bonds of CDs, and you can maintain your principal while earning a steady income. They give you the ability to invest in multiple sectors with the flexibility to cash out before maturity. To buy corporate bonds , you need to set up a brokerage account. You invest in forex when you buy and sell different currencies.
Countries issue their own currencies, and the value of each currency varies in relation to every other country. You should select a reputable broker to reduce the risk of fraud. Understand all the risks and trends associated with currency trading. Take a look at how to trade forex. An option is a contract to sell or buy a stock at a pre-agreed price and by a specific date.
In options trading, you must decide:. Options contracts are based on various underlying securities, and you can place different types of orders, making them a more versatile investment option than stocks. Options trading is complicated and risky, so you need to work with the best brokers for options traders. These companies usually have a poor or nonexistent financial history. These stocks are a great option if you want to own many shares due to their low price. Prices are highly volatile, so you must be patient and risk-tolerant to reap big.
CrowdStreet is a real estate investing platform that gives investors direct access to individual commercial real estate investment opportunities, allowing you to review, compare, and personally choose the deals that meet your own investment criteria. Understanding and managing portfolio risk is one of the most important ways to effectively manage your portfolio.
Quantifying risk in your portfolio allows you to optimize your potential returns. When you do that, you can allocate more capital can be to riskier assets that generate the highest returns. The only problem is finding these stocks takes hours per day. You can today with this special offer:.
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And while you may be able to receive monthly interest payments if you like, many investors choose to wait until their CDs have matured and cash in on the amassed interest at the end. However, as a disclaimer, most CDs will penalize you for withdrawing your funds before maturity usually in an amount equal to about three months of interest or so, but the fee varies depending on the bank , so you should really let your CD be until it matures if you want the full benefits of the investment.
As a refresher, treasury securities are bonds issued by the U. Treasury and backed by the government's credit - and the range of treasury products is pretty extensive. While you can invest in a variety of treasuries including treasury notes, treasury bills, floating-rate notes FRNs and more, a popular option for short term investments are treasury inflation-protected securities TIPS.
So, the underlying value rises with inflation. However, once the TIPS matures, you will get either the adjusted amount or the original investment - whichever is larger, so deflation won't hurt your investment. Typically, TIPS has a return of between 0. The idea behind the TIPS is that your end investment will be worth the amount of your original investment plus the interest you've accrued.
And, your investment is protected from changes in inflation. But even though they've declined a bit in popularity in recent years, rewards checking accounts are still a good way to earn a bit in a short-term capacity. If you've got a shorter timeline around two years or so , bond funds could be a great option.
Managed by professional financial advisers , bond funds are often a higher yield although sometimes riskier investment than money markets. So, if you're looking for a high-yield short term investment, bonds may just be the right fit. Still, make sure to pick a bond fund with low fees. Unfortunately due to the nature of the market, your investment is not guaranteed.
Still, there are no penalties for withdrawing your money early which could be a huge plus for some investors. Municipal bonds are a bit riskier than TIPS or other kinds of bonds, but there's pretty high yield potential. Municipal bonds are issued by local, state or government agencies not the federal government.
As a plus, municipal bonds are often exempt from interest tax. Still, if you hold on to your bond until its maturity, you can get your whole investment plus the interest back. Almost like getting a credit card , borrowers are rated by their creditworthiness, which can help minimize risk when lending to someone with a higher degree of creditworthiness.
While the interest will vary depending on the borrower's creditworthiness for Lending Club, those who rank as "A" are 4. These FDIC-backed accounts allow investors to invest their money, earn a higher interest rate than a savings account, and protect their money in the meantime. However, money market mutual funds are not FDIC-insured, so it is important to note the difference. Money market accounts act in a similar fashion to regular accounts in that you can often write checks or use a debit card for your account although you may be limited in how many times you can use it.
While perhaps not a traditional investment vehicle, Roth IRAs are actually similar to many of the other short-term investment strategies in that you can withdraw funds at any point without penalty. Because the Roth IRA is post-tax meaning your contributions are taxed before they're invested , you can withdraw them without having to pay taxes or penalties. Additionally, Roth IRAs can be good short-term investment options because you can often invest in higher return options like ETFs and mutual funds.
This is a great option for a quick, high return on investment read: double-digit returns. Paying off high-interest debt like credit cards is a smart choice because you can get a great return while improving your financial situation - and, guarantees a return. In general, paying off high-interest debt will get you great returns, so it's definitely worth looking into.
Albeit a bit of a more conservative option, online savings accounts can still get you a better interest rate than many traditional banks. Because there are no limits on withdrawals, liquidity is higher for online savings accounts and maybe a draw for investors.
Despite being a somewhat unorthodox short term investment strategy, taking advantage of promotional and cashback deals can help you earn money fast. Because of their time frame, short term investments are often seen as safer than long term investments, especially on the stock market. While long-term investment positions especially on the stock market are subject to market fluctuations, bull and bear markets which may erase gains or yields and other risks, short-term investments are often thought to be safer and can still produce decent profits for the investor.
IPOs are risky because despite the efforts make by the company to disclose information to the public to obtain the green light on the IPO by the SEC, there is still a high degree of uncertainty as to whether a company's management will perform the necessary duties to propel the company forward.
The future of startups seeking investment from venture capitalists is particularly unstable and uncertain. Many startups fail, but a few gems are able to offer high-demand products and services that the public wants and needs. Even if a startup's product is desirable, poor management, poor marketing efforts, and even a bad location can deter the success of a new company.
Part of the risk of venture capital is the low transparency in management's perceived ability to carry out the necessary functions to support the business. Many startups are fueled by great ideas by people who are not business-minded. Venture capital investors need to do additional research to securely assess the viability of a brand new company.
Venture capital investments usually have very high minimums, which can be a challenge for some investors. If you are considering putting your money into a venture capital fund or investment, make sure to do your due diligence. A country experiencing a growing economy can be an ideal investment opportunity. Investors can buy government bonds, stocks or sectors with that country experiencing hyper-growth or ETFs that represent a growing sector of stocks.
Such was the case with China from The greatest risk of emerging markets is that the period of extreme growth may last for a shorter amount of time than investors estimate, leading to discouraging performance. The political environment in countries experiencing economic booms can change suddenly and modify the economy that previously supported growth and innovation.
Real estate investment trusts REITs offer investors high dividends in exchange for tax breaks from the government. Due to the underlying interest in real estate ventures, REITs are prone to swings based on developments in an overall economy, levels of interest rates and the current state of the real estate market, which is known to flourish or experience depression. The highly fluctuating nature of the real estate market causes REITs to be risky investments. Although the potential dividends from REITs can be high, there is also pronounced risk on the initial principal investment.
While these investment choices can provide lucrative returns, they are marred by different types of risks. Whether issued by a foreign government or high-debt company, high yield bonds can offer investors outrageous returns in exchange for the potential loss of principal. These instruments can be particularly attractive when compared to the current bonds offered by a government in a low-interest-rate environment.
However, not all high yield bonds fail, and this is why these bonds can potentially be lucrative. Currency trading and investing may be best left to the professionals, as quick-paced changes in exchange rates offer a high-risk environment to sentimental traders and investors. Those investors who can handle the added pressures of currency trading should seek out the patterns of specific currencies before investing to curtail added risks.
Currency markets are linked to one another and it is a common practice to short one currency while going long on another to protect investments from additional losses. Currency, or forex trading, as it is called, is not for beginners. If you want to learn more, check out our tutorial or take our Forex for Beginners course on the Investopedia Academy.
Trading on the forex market does not have the same margin requirements as the traditional stock market, which can be additionally risky for investors looking to further enhance gains. United States Securities and Exchange Commission. World Bank. Internal Revenue Service. Fixed Income Essentials. Real Estate Investing. Your Money. Personal Finance. Your Practice. Popular Courses. Trading Trading Strategies.
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