Best Investments That Earn A Great Return (10% or More)
Investing is an essential part of building wealth, achieving financial security and outpacing inflation. However, with so many investment options available, it can be challenging to determine which investments will provide the best returns. While the past performance of an investment is not a guarantee of future returns, there are some investments that have a track record of generating returns of 10% or more.
Before diving into the best investments that earn a great return, it’s important to understand the concept of ROI (Return on Investment). ROI is a financial metric that calculates the percentage of return on an investment relative to the investment’s cost. In other words, ROI measures how much money an investment has made or lost, relative to the amount invested.
Now let’s explore some of the best investments that have the potential to earn a great return of 10% or more:
1. Peer-to-Peer Lending
Peer-to-peer lending has become increasingly popular in recent years and for good reason. Peer-to-peer lending platforms allow individuals to lend money to borrowers, cutting out traditional financial institutions. This means that borrowers can often secure a lower interest rate, while lenders can earn a higher return.
Returns on peer-to-peer lending platforms can vary depending on the platform and borrower. However, it’s not uncommon to see returns of 5% to 15% or more. It’s important to note that peer-to-peer lending does carry some risk, as borrowers may default on their loans. However, many platforms offer risk-management tools and measures to help mitigate this risk.
2. Real Estate Investment Trusts (REITs)
Real estate has long been a popular investment option and for good reason. Real estate offers the potential for capital appreciation, as well as a steady stream of income through rent payments. However, owning physical real estate can be expensive and time-consuming.
Real estate investment trusts (REITs) offer investors the opportunity to invest in real estate without having to buy or manage properties directly. REITs are companies that own, manage or finance income-producing real estate properties. Investors can purchase shares of the REIT, which entitle them to a portion of the income generated by the properties.
Returns on REITs can vary depending on the type of properties owned by the REIT and the overall market conditions. However, it’s not uncommon to see returns of 5% to 10% or more. It’s important to do your due diligence and choose REITs with a strong track record and a solid portfolio of properties.
3. Dividend Stocks
Dividend stocks can be an excellent way to earn a solid return on investment. Dividend stocks are stocks that pay out a portion of their earnings to shareholders in the form of dividends. Companies that pay out high dividends typically have a strong financial position and a consistent track record of earnings.
High dividend stocks can offer a solid return on investment, with some companies offering yields of 10% or more. However, it’s important to choose companies with a history of consistent dividend payments and strong financials. Additionally, it’s important to diversify your portfolio to minimize risk.
4. Rental Properties
Owning rental properties can provide a steady stream of income and the potential for capital appreciation. However, owning rental properties can be expensive and time-consuming. Investors must not only purchase the property but also maintain it and manage tenants.
Returns on rental properties can vary depending on the location and type of property. However, it’s not uncommon to see returns of 8% to 12% or more. It’s important to do your due diligence and choose properties in desirable locations with a strong rental market.
5. Certificates of Deposit (CD)
Certificates of deposit (CD) offer a guaranteed return on investment and are FDIC insured. CDs are issued by banks and offer a fixed interest rate for a specific period of time. The longer the term of the CD, the higher the interest rate.
Returns on CDs can vary depending on the length of the CD and the interest rate. However, it’s not uncommon to see returns of 2% to 5% or more. It’s important to note that CDs typically offer lower returns than other investment options but also carry less risk.
Bonds are a type of fixed-income investment that can offer investors a predictable stream of income. When you buy a bond, you are essentially lending money to the bond issuer, which can be a corporation, government agency, or government entity. In return for your investment, the issuer promises to pay you back the bond’s principal amount plus interest over a predetermined period.
Bonds can provide a return of 5% to 10% or more depending on the type of bond and the issuer. It’s important to choose bonds with a high credit rating to minimize risk. Generally speaking, the longer the term of the bond, the higher the interest rate, and the greater the potential for return. However, longer-term bonds also carry more risk, as the issuer may default on the bond or the value of the bond may decline if interest rates rise.
7. Invest in Invoice discounting
Invoice discounting is a type of financing where a company sells its accounts receivable (invoices) to a third party at a discount in exchange for immediate cash. This type of financing can be an attractive option for companies that need cash flow to fund their operations, as it allows them to access funds quickly without having to wait for their customers to pay their invoices.
As an investor, invoice discounting can be a way to earn a return by providing capital to companies in exchange for a share of the discount on their invoices. The return on investment for invoice discounting can vary depending on factors such as the creditworthiness of the companies involved, the terms of the invoice discounting agreement, and the prevailing interest rates.
The return on investment for invoice discounting can also vary widely depending on the terms of the agreement and the risk involved. Some invoice discounting agreements may offer returns in the range of 5% to 10%, while others may offer higher returns of 15% or more. However, higher returns typically come with higher risk and may require a more thorough evaluation of the creditworthiness of the companies involved.
8. Growth Stocks
Growth stocks are companies that are expected to grow at a higher rate than the market average. They offer the potential for high returns but also come with higher risks. It’s important to do your due diligence and choose companies with strong financials and growth potential.
Investing in growth stocks can provide investors with the potential for high returns, as the companies are expected to grow and increase their revenue and profits over time. However, growth stocks can also be riskier than other types of stocks, as the companies may not be profitable yet or may face increased competition that could affect their growth prospects.
When investing in growth stocks, it is important to research the company’s financials and growth potential, as well as the industry and market trends that could affect their performance. Investors should also consider their own investment goals and risk tolerance before investing in growth stocks.
9. Exchange-Traded Funds (ETFs)
Exchange-Traded Funds (ETFs) are investment funds that are traded on a stock exchange, similar to individual stocks. ETFs are designed to track the performance of a specific index, such as the S&P 500, and can provide investors with exposure to a broad range of assets, such as stocks, bonds, and commodities.
One of the key advantages of investing in ETFs is their low cost. ETFs typically have lower management fees than traditional mutual funds, as they are passively managed and do not require the same level of active management as mutual funds. This can result in higher returns for investors over time. Another advantage of investing in ETFs is their flexibility. ETFs can be bought and sold throughout the day, just like individual stocks, which makes them more convenient for investors who want to buy or sell quickly.
ETFs can also offer investors a higher potential return than traditional investments, such as bonds or savings accounts. Depending on the ETF and market conditions, returns can range from 5% to 15% or more.
Overall, ETFs can be a good option for investors who are looking for a low-cost, flexible, and potentially high-return investment. However, like all investments, ETFs come with risk and investors should do their own research before investing.
10. Investing in Small Businesses
The returns on investing in small businesses can vary widely and are difficult to predict, as they depend on a range of factors such as the business’s industry, growth potential, and management team. However, investing in small businesses has the potential to provide high returns if the business is successful.
According to a study by the Small Business Administration, the average return on investment for angel investors (individual investors who provide funding to start-ups and small businesses) is between 20% and 30%. However, this is an average and returns can vary widely depending on the specific investment.
In addition to the potential for high returns, investing in small businesses can also provide investors with the opportunity to support entrepreneurs and help grow the economy. However, it’s important to carefully evaluate the business and understand the risks before investing, as small businesses can be more susceptible to failure than larger, established businesses.