Savers today are robbed both directly and indirectly through real price inflation and now, in many parts of the world, with negative interest rate policies. Banks and credit unions should be embarrassed advertising these half-a-percent to 1-percent CDs (certificates of deposit).
If you’re looking for fixed income, here are 3 good options that I personally use.
1. Lending Club – With a recent $1 billion investment by JP Morgan, and probably the best track record in their industry, I think Lending Club has to be the preferred peer-to-peer lender for savers.
You’ll receive a return of 5 to 9% depending on the risk level you are willing to take. The company has funded over $16 billion in loans since 2008, and is the only publicly-traded company in its class.
Their standards are high, in my opinion, with the average borrower having a near-700 credit score and earning $75,000 as a household.
2. Dividend-paying whole life – We talked about this last week in my favorite dividends article.
In addition to annual premiums, you can also set up policies we call “set it and forget it.”
There are policies you can front-load with a one-time payment, and then you’re done! You get to enjoy a compounded internal rate of return of 4.5%, tax-deferred.
I recommend you speak to a specialist to set one of these policies up. You can see our suggestions in last week’s article.
2. Tax Liens – Sure, it will take a little effort -- more than just throwing it at a mutual fund that's going to steal your money -- but you can easily make 15-25% returns by investing in property tax liens.
Here's the deal: the local governments need money to operate, so when a homeowner fails to pay their taxes, the government sends these back-taxes to auction, where investors can buy them. This funds the government and puts the investor in a situation where the government becomes their collection agency. It’s one they can't get out of, as a tax lien is usually the first lien. Even in a foreclosure, it has to be paid in full, with penalties, before a house can be sold.
The owners, who usually end up paying their taxes, will have to pay a penalty for being late – a fee that is demanded and collected by the government and paid out to the investor with his full principal. Each state is different in how they collect, and ideally you want to stay local, but this is something anyone can do and receive a great return.
Summary: let’s make saving and compounding our money great again. Use the 3 ideas to compound your wealth. For other ideas, please visit the only advisor I trust, Nicholas Green, at FMTAdvisory.com