Are you getting the best rate of return on your investment? The market is heating up but are your investments? Kiplinger’s Personal Finance Magazine just discussed 45 ways to boost your investment yield in their latest issue. I have to say that I was pretty disappointed in their recommendations.
I love the magazine, but I didn’t really care for a list of mutual funds and Exchange Traded Funds (ETFs). I wanted concrete ideas on how to earn a 10% annual rate of return on my investments.
US Treasuries are earning less than 1% and money market funds are not fairing much better. Certificates of deposit are barely scraping by at 2% or so even for the longest maturities. Last year the S&P 500 Index finished up over 13%, and this year has started off just as well (knock on wood) with the market up another 14% year to date (YTD).
But, are these levels going to last? The stock market has returned an after of 8% annually over the past century. So, where can an investor find 10% when the market retraces or moves sideways?
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10 Ways To Earn A 10% Rate Of Return On Investments
Peer-To-Peer Lending Has A Great Rate Of Return On Investments
Peer-To-Peer Lending through companies like Lending Club are my favorite way to earn a rate of return on investments over 10% annually. Lending Club’s most conservatively A rated loan earns over 6% for the investor. It does not take long or much more risk to earn over 10% returns. And, Lending Club’s most risky investments earn a rate of return on investments of over 20% annually.
I’m a huge fan of Lending Club and have recommended investors adding Lending Club loans to their investment portfolio for years here on Money Q&A.
Starting Your Own Business
I am a huge fan of starting your own business. I wish everyone would have the entrepreneurial spirit. It was one of the best ways to earn a 10% rate of return on investment. Whether it is opening a neighborhood restaurant or as simple as starting a blog, a business venture is a great way to boost your investments’ returns.
Short-Term Stock Trading
Granted, short-term stock trading is not for everyone and should not be done with a large portion of your entire investment portfolio. Trying to time the stock market is a rough way to earn a 10% rate of return on investments, but it could be well worth your time and efforts with a small portion of your investment portfolio.
I have been using Jason Bond’s Swing Trading service for the past three months, and I’ve been having a blast trading stocks on a short term basis. And, even better, I’m up 15% over the course of the past 12 weeks. That’s a lot better than 10% annualized of course.
Jason Bond Swing Trades is a service that teaches investors how to, not day trade, but invest in small cap stocks which are held only a few days or weeks. You can follow along as Jason trades his own portfolio, mirror his trades, and learn the ropes of short term technical analysis trading. I was skeptical at first, but I have actually really enjoyed getting back into stock trading. It also doesn’t hurt that I’m up!
Investing In Real Estate
Real estate is a great way to earn over 10% rate of return on investments. I’m a big fan of becoming a landlord which I’ve talked about several times here on Money Q&A. While you need to run your numbers and do your research, you can earn a 10% rate of return of investments with your rents.
Real Estate Investment Trusts (REIT) are another great option if you do not want to own real estate directly. REITs are required by law to distribute a majority of their earnings to their shareholders in the form of dividends. These payouts and real estate’s impending comeback make REITs an attractive alternative to help investors reach the 10% threshold.
Master Limited Partnerships (MLP)
Master Limited Partnerships are partnerships that trade like a stock. They are risky and not for every investor, but they can often offer a larger rate of return than other investments. Many MLPs invest in the energy sector, minerals, and other raw material type ventures. They often have a high yield because they do not pay income taxes themselves and pass on that responsibility to their shareholders.
Art And Other Collectables Can Diversify Your Investments
Beverly Solomon who is the Creative Director of musee-solomon recommends investing in art and other collectibles. “Good art, great collectibles, quality antiques as a whole are safe investments that tend to grow in value at as good as or better rate than almost any other investment. Plus they–unlike stocks or bonds–have the added bonus of your being able to enjoy them in your home on a daily basis,” she said.
Create A Product To Boost Your Rate Of Return On Investments
Robert Pagliariri wrote one of my favorite books, “The Other 8 Hours”, where he talked about becoming a creator. It is not enough to simply work a 9 to 5 job and hope to become rich. It unfortunately just does not work that way. Those who are more successful than most are creators. They create businesses. They create products. They make things people want to buy. That’s how you can earn a 10% rate of return on investments.
Junk Bonds Are An Interesting Choice
Junk bonds get a bad rap simply because of their name. But, don’t be fool by the lingo. There are basically two categories of bonds: investment grade and junk bonds.
Junk bonds are simply high yield, higher risk bonds from companies who have seen their credit ratings suffer from the rating agencies like Moody’s and Standard and Poor’s. Junk bonds typically have a rating of BB or Ba or less depending on whose scale you use.
The Barclays US Investment Grade Credit Index, which tracks high grade bonds, returned 1.63% through April of this year. The safest grade junk bond is earning 5% interest annually with less safe options earning a rate of return more than that. While 10% may be the riskiest of all junk bonds, it is still possible with some to earn that much.
Paying Off Your Debt Is Like An Investment
Paying off a debt with a high interest rate is the same as having earned that exact same rate of return on investments would have given you. It is all about opportunity costs. In fact, that’s also what I recommend people do with a pay raise as well. It is all about the best opportunity for you to put your money to work for you.
For example, if you have a credit card with a balance that is charting you a 16% interest rate, paying off that debt would be the same as having invested and earning that 16% on the investment. Paying off high interest debt is a great way to earn a stellar rate of return.
Stocks For The Long Term
“Make it automatic,” said David Rae, a retirement income specialist and CFP, recommends setting up automatic investments. “Put money away every month, when time are good and times are bad. Avoiding investing mistakes will make you more money in the long run than trying to pick the hottest sector/stock/fund/investment of the years.”
With the help of a Financial Planner, you can pick a well diversified investment portfolio appropriate to your financial situation and the amount of risk that you are willing to accept. Granted, you may need to take on more risk if you want that 10% rate of return.
Most of us are a victim of recency bias. An entire generation of investors have only known the stock market of 2003 to 2013. Our most recent past is not a precursor to what our long term investing future will be. A 10% annual rate of return on investments over the long term is very much achievable.