How To Earn Up To 11% On Your Money!!! (Yes it's possible)
Ok. Let's talk turkey here. Are you looking to get a REAL return on your money or are you satisfied stashing it away under your mattress or in a savings account. Some of you may fancy yourself as a sophisticated investor and invest in CDs. Wow, don't make me laugh. Let's get down to business here and stop playing around. If you want your money to grow, then you have to do some research and exercise discretion. You are going to have to take a little bit of risk. I'm not saying you should bet the farm, but let me be honest and straightforward. If you want to earn more interest than what you are currently getting in your ultra-safe and ultra-conservative vehicles, then let's step off the edge just a bit and test the waters. Here are a few investments you may want to look into. If you are looking for guarantees, then please go read another blog.
For the rest of you realists, lets get started.
Municipal Bonds: 1% - 4%
Issued by state and local governments, muni bonds yield an average of just 2.2%. Doesn't sound like much but you won't owe a penny in federal tax on most types of muni income, and you can get a break on state taxes too, if you invest in munis issued in the state where you reside.
Munis could slide if states or localities run into financial trouble. And munis can be quite sensitive to changes in the interest rates.
Investment-Grade Bonds: 2% - 4%
Yields on high-quality corporate bonds look much more appealing than they did a year ago. Also attractive are mortgage-backed securities---pools of commercial real estate loans or residential mortgages. Some funds focus on mortgage securities to get a yield bump over Treasuries.
The bonds' safety net is their relatively dependable coupon, or annual interest rate, issued by credit-worthy borrowers. But those fixed payments don't offer much protection against rising interest rates. Weakening corporate balance sheets, credit-rating downgrades or a slowdown in the real estate market could also depress bond prices.
Junk Bonds and Floating-Rate Bank Loans: 3% - 5%
Because high-yield, or junk, bonds are issued by companies with below-average credit ratings, they come with above-average risk. But junk bonds can be particularly lucrative in an expanding economy (which is currently the case).
Another good option these days is a close cousin of junk bonds: floating-rate bank loans. Companies with a low credit rating take out these loans to finance a merger or fund their business operations. The loans don't yield much at face value, but their coupons adjust with short-term market rates, making them a good bet to pay out more if rates keep rising.
A downturn in the economy would push up the default rates, which would ripple through the junk-bond market, pressuring prices.
Real-Estate Investment Trusts: 3% - 6%
REITs, which own and manage real estate such as apartments, malls, and offices, look appealing. Yields average around 4.1%, about twice that of the Standard & Poor's 500-stock index.
Many REITs borrow heavily to buy and develop properties. Their financing costs would increase if interest rates were to rise, pressuring the stocks. A downturn in real estate values would also likely hurt REIT shares.
Foreign Bonds: 3% - 6%
Interest rates may be on the upswing in the U.S., but central banks in other parts of the world are still trying to keep them down. That can make foreign bonds a better bet over the next year.
Foreign bonds could slump if overseas weaken. A rise in the dollar could hurt bonds that are denominated in foreign currencies.
Master Limited Partnerships (MLPs): 6% - 8%
With domestic oil production rising to about 9 million barrels per day---up from 8.4 million in mid 2016---master limited partnerships are thriving once again. The firms operate pipelines, storage terminals and other types of infrastructure for the oil-and-gas industry.
The stocks could slide if oil prices tumble and producers scale back on drilling. Steeper financing costs for new projects could hurt the business. If you buy individual MLPs, you'll have to deal with complex K-1 tax forms.
Mortgage REITs: 9% - 11%
These REITs use some of their own cash to buy mortgage-backed securities. They also load up on short-term debt to buy assets, and many boost their payouts with other types of real estate loans or direct lending to property owners.
The primary threat to mortgage REITs is if short-term rates increase without a corresponding bump in long-term rates, squeezing their net income (and dividends).
There you have it. If you are looking to get educated in the ways of "The UnderCover Millionaire" then you better get out your pad and pencil and take notes. We do not pull punches. If there is a Money Monster out there, we will find it and bring it to you.