The interest rates on investments have gone down significantly in the last decade. Companies are willing to provide higher interest rates for riskier investments, but investors looking for safe investment plans are almost forced to compromise due to the low interest rates.
With inflation becoming a rising concern for investors planning to park their money safely, it is time to consider the different investment schemes that guarantee a specific rate of return irrespective of what the economic condition is.
1. Money market funds
Mutual funds have become widely popular among investors, but the fluctuating interest rates donāt allow you to calculate the expected amount at the end of the term. Moreover, mutual funds are subject to market risks. There is no guarantee that you will end up profiting from the investment. Money market funds, on the other hand, are “safe” mutual funds. These generally operate in short-term plans such as interest-bearing securities and government bonds. Many investors prefer investing in money market funds through their bank. Your investment will then be termed as FDIC insurance. The most significant benefit of this investment scheme is that a loss of principal is nonexistent. Although the average rate of returns varies from 1 to 2%, the safety and security involved making it one of the best investment opportunities for long-term prospects.
2. High dividend stocks
Although high dividend stocks donāt technically guarantee a fixed ROI, there are high chances that you will earn a significant amount if you invest in companies that are known to provide yearly dividends. Companies pay dividends when they want to share a part of their profit with shareholders to increase their interest and invest more on the shares of the respective company.
Since you will be dealing with shares, there is always a chance of losing the principal amount, but you can reduce this risk by researching thoroughly. Your objective should be to invest in reputable companies that have a history of paying dividends instead of a stagnant rate of dividend ā the rate should increase every year.
In many ways, this is similar to cryptocurrency trading, which has become increasingly popular over the past couple of years. Whereas crypto investors rely on the Bitcoin Loophole Test to find profitable digital assets with potentially high returns, you can turn to online websites to find the top companies that pay yearly dividends. Investing in the shares of these companies will help earn a stable ROI, making your principal amount grow exponentially.
3. Treasury Inflation Protected Securities
Commonly known as TIPS, Treasury Inflation Protected Securities pay fixed interests like treasury bills, notes, and bonds. However, TIPS account for inflation. If you think 0.5 to 1% ROI is low, you need to understand that the return you get is the adjusted amount after inflation effects. Unlike other investment options, TIPS will notify the present inflation rate and provide the return according to the current market rate. There are, however, a few TIPS rules that you need to keep in mind:
ā¢ The principal amount adjusted after inflation will not be paid until the invested securities mature.
ā¢ The adjusted amount after inflation is fully taxable. This often reduces the level of protection in the long-run.
ā¢ It is possible to pay advance tax on the income amount you have not yet received. This allows saving a few bucks compared to the original taxable amount after maturity.
4. Certificates of Deposits
CDs are also known as term-deposits where the bank pays a guaranteed interest rate for a specified time. It is the safest way to invest money without any significant rules to follow. There are no risks of losing the principal amount as the bank is responsible for providing interest. Another reason why CDs are so popular is that the rate of interest is more for longer deposits. Term periods can range from 90 days to more than 10 years. So, you can calculate the return on investment according to the rate of interest the bank is offering and go for a plan that suits your pocket.
The booming stock market together with the low interest has affected many investors. But, if you want to park your principal amount and earn a guaranteed ROI, you should be quick to put your money in these investment options.