When it comes to investing, everyone wants to maximize their returns. But which high-yield investments offer the best return on investment (ROI)? After analyzing the data, there are five investments that stand out: stocks, rental housing, high-yield savings accounts, certificates of deposit (CDs), money market accounts (MMAs), treasury bonds, and index funds. The stock market has long been considered to be the source of the highest returns for investors, surpassing all other types of investments, including financial securities, real estate, commodities and art collectibles over the past century. Although past performance doesn't guarantee future profitability, stocks have historically returned around 10% per year.
Rental housing is another great option for investors. The ROI depends largely on the market, but it is usually between 5% and 10% per year. Rental housing is a great opportunity because it rarely loses value. In most parts of the country, real estate prices are only rising.
Even with mortgage rates on the rise, they're still extremely low in historic terms, so financing a rental property is still a perfectly viable option. High-yield savings accounts are a great option for risk-averse investors who want a stable return. Currently, the main high-yield savings accounts pay a range of interest rates, from 0.45 to 0.61%, a far cry from more than 2% a few years ago. However, since the national average savings rate stands at just 0.06%, high-yield savings accounts are still a big deal.
Certificates of deposit are almost identical to savings accounts. Most are insured by the FDIC, so there's no risk involved. With a CD, you accept a time horizon in which you generally invest between one month and up to 10 years, and you have to pay a penalty if you access your cash before that date. Money market accounts operate on principles similar to those of a CD or savings account.
They generally offer better rates than savings accounts, but they also offer more liquidity and may even allow you to write checks or use a debit card with the account. Treasury bonds are another great option for investors who want stability and low risk. You invest with a fixed interest rate and a maturity date that ranges from one month to 30 years from the purchase of the bond. Many people turn to inflation-protected Treasury securities, or TIPS, in response to inflation.
Your interest payments will be considerably lower than what you would earn with a normal treasury of the same duration. Finally, index funds are an excellent option for investors who want to diversify their portfolio without taking on too much risk. The S&P 500 is one of the most popular options for index investments and has historically returned around 10% per year. You could also consider the Russell 1000, which is comprised of the 1000 most valuable American companies.
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