The investment world can offer the quick thrill of fast turning stocks, but that method is also incredibly risky and offers little by way of lasting returns. However, if you're interested in finding a longer term, high interest rate investment, there are a couple of good options depending on your risk tolerance.
Here are two ways you can get started with high interest rates the next time you speack to your financial advisor or broker.
Dividend-Paying Index Funds
An index fund is a mutual fund that tracks, or tries to match the performance of, one of the major market indexes like the S&P 500 or Dow Jones. A broad-market fund tracks all of the companies listed on that particular index. But other funds are tailored with a specific focus like high-yielding dividends.
A key benefit of a dividend-paying index fund is that the fund will contain ownership to a number of different companies. This means that the poor performance of one or two companies isn't going to tank the value or dividend payout. Most funds are rebalanced either quarterly or yearly and that will offer a chance for the fund manager to kick out any chronic underperformers. As an investor, all you have to do is buy in and check in on the fund's updates periodically.
Returns on these investments are best when held over a longer period of time. These also work well in an already balanced portfolio that just needs a bit more dividend power.
Real Estate Investment Trusts (REITs)
A REIT is a security that trades similarly to a stock but is legally required to pay out dividends equal to a minimum of 90% of its taxable income each year. These trusts can invest in either property ownership (equity), mortgages or a combination of both. The performance of REITs are tied to the housing market so an investor would want to get in during a housing recovery, rather than during a bubble, in order to benefit from this high interest rate investment.
Overseas REITs can offer higher returns but that can also come with a higher rate of volatility. Several European countries, for example, have slowly recovering housing markets but are also on the brink of financial collapse, which could make the market tank again. Domestic REITs carry a lower return but also a lower risk compared to the overseas counterparts. Look into online real estate investing to see what high interest investments options are available.
Share19 February 2015
I still remember the day that my wife and I bought our first home. We were excited about filling the place with new furniture and looking for great area rugs. Unfortunately, before we knew it, we found ourselves deeply in debt. It was difficult to dig our way out, but over the course of the next several years, we were able to make things right. I want to teach other people how to manage finances so that they can avoid the turmoil that we went through. Financial planning might seem impossible, but with a little practice, I know it can become second-nature.