Invest Wisely: Cash Strategies For Today

Investing your money is a great way to build your wealth over time. However, it's important to balance potential gains with the risk involved.

- High-yield savings accounts: These accounts offer a risk-free way to invest your money for the short term, with yields of over 4% APY. They also tend to be FDIC-insured, so your investment is protected.

- Long-term certificates of deposit (CDs): CDs are considered safe investments and generally offer higher interest rates than savings accounts. They can be a good choice for those seeking higher yields while maintaining a low risk profile.

- Long-term corporate bond funds: These funds invest in bonds issued by corporations and tend to have an average maturity of 10 years or more. They can provide higher returns than government and municipal bond funds but carry more risk.

- Dividend stock funds: Dividend stocks are companies that pay out a portion of their profits to shareholders. Investing in dividend stock funds can provide a steady income stream and potential for higher returns than other types of stocks.

- Value stock funds: These funds invest in stocks that are more bargain-priced compared to others in the market. They may offer higher returns but carry more risk than other types of investments.

- Real estate investment trusts (REITs): REITs allow you to invest in real estate without the hassle of being a landlord. They tend to provide steady income and potential for capital appreciation.

- S&P 500 index funds: These funds are based on a diversified portfolio of 500 large American companies, offering broad exposure to the stock market. They are considered less risky than investing in individual stocks.

- Nasdaq-100 index funds: These funds invest in the 100 largest companies listed on the Nasdaq stock exchange, focusing on tech and growth companies. They offer high growth potential but also come with significant volatility.

- Rental housing: Investing in rental properties can provide a steady income stream and potential for capital appreciation. However, it requires more hands-on management and a larger initial investment.

High-yield savings accounts

• My Banking Direct High-Yield Savings Account: 5.55% APY
• EagleBank High-Yield Savings Account: 5.38% APY
• Western Alliance Bank High-Yield Savings Premier Account: 5.36% APY
• BrioDirect High-Yield Savings Account: 5.30% APY
• Forbright Growth Savings: 5.30% APY
• Ivy Bank High Yield Savings Account: 5.30% APY
• TAB Bank High-Yield Savings Account: 5.27% APY
• NexBank High Yield Savings Account: 5.26% APY
• BMO Alto Online Savings Account: 5.10% APY
• Synchrony High-Yield Savings Account: 4.75% APY

While high-yield savings accounts are considered safe investments, there is a risk of losing purchasing power over time due to inflation if rates are too low. It's also important to note that interest rates on these accounts are variable and can change at any time.

When choosing a high-yield savings account, consider factors such as the interest rate, minimum deposit and account fees. It's also worth looking for accounts that offer perks like no monthly maintenance fees and low minimum opening deposits.

Money market accounts

When choosing a money market account, it is important to look for one with a high rate and no monthly fees. Some money market accounts charge a monthly fee of around $10 or more if you don't maintain a minimum daily balance, typically $1,000 or more. It is also important to confirm that the account has check-writing privileges and that you won't be paying any fees, as these will cut into your interest earnings.

• Vio Bank Cornerstone Money Market Account: 5.30% APY, $100 minimum deposit
• UFB Direct: 5.25% APY, no minimum deposit
• CFG Community Bank: 5.25% APY, $1,000 minimum deposit
• Quontic Bank: 5.00% APY, $100 minimum deposit
• Sallie Mae Bank: 4.65% APY, no minimum deposit
• Ally Bank: 4.20% APY, no minimum deposit
• Discover Bank: 4.00% APY, no minimum deposit

Crypto savings accounts

When you deposit into a crypto savings account, your currency is lent to others who can use the crypto for a certain period of time. In exchange, the borrower promises to pay you interest on the crypto that you lend them. Yields on cryptocurrencies range from about 4% to 8% or more. This is significantly more than the yields on traditional savings accounts.

Withdrawal restrictions may be imposed by crypto savings accounts. In a traditional savings account, you can withdraw money up to six times per month without penalty. Unfortunately, there's no standardized guidance for withdrawal limits, so it's tough to generalize on this point.

One odd facet of certain crypto savings accounts is that interest may not compound. That means your initial deposit grows over time, but the interest on the growth does not compound. You essentially have to spend or trade the interest to realize the gains.

• KuCoin: One of the most popular cryptocurrency exchanges, and they have a great savings product called KuCoin Earn. You can earn crypto with high APY by saving, staking, or taking advantage of promotional offers. Right now, you can earn 1.17% APY on USDC and 0.03% on BTC.
• Uphold: A solid cryptocurrency exchange for the last several years, and they also offer great staking rewards. Right now, you can earn up to 14% APY on your crypto assets.
• Nexo: Boasts minimal lock-up times (less than 24 hours) and third-party guarantees of its crypto assets. Right now, you can get up to 8% on stablecoins and 3% on Bitcoin.
• Coinbase: Best known as a digital wallet. Eligible US-based customers can earn up to 5.15% APY on US Dollar Coins (USDC). Unlike other companies on this list, Coinbase doesn’t lend out its USDC.
• Crypto.com: Advertises some of the highest interest rates on the market. The platform pays interest on 15 traditional cryptocurrencies and 8 stablecoins. The yields are based on simple daily interest. To get the highest yields, you will have to keep your investment for at least 3 months.
• YouHodler: Currently not available in the United States, but available in the UK, EU, Eastern Europe, and Asia. The company allows savers to withdraw from the platform at any time. The minimum investment is $100 USD.
• Ledn: A crypto-lending platform that brands itself as a crypto savings account. Right now, you can get up to 10.5% on USDC and up to 2.5% on BTC.

Real estate investment trusts (REITs)

REITs invest in a wide range of property types, including apartment buildings, cell towers, data centres, hotels, medical facilities, offices, retail centres, and warehouses. Most REITs focus on a specific property type, but some hold multiple types of properties in their portfolios.

There are three main types of REITs: equity REITs, mortgage REITs, and hybrid REITs. Equity REITs operate like landlords, handling all aspects of property management and collecting rent from tenants. Mortgage REITs, on the other hand, don't own the underlying property but instead own debt securities backed by the property, such as mortgages. Hybrid REITs combine the investment strategies of both equity and mortgage REITs, owning and operating real estate properties while also holding commercial property mortgages.

REITs offer several benefits to investors:

• Steady income: REITs are required to distribute at least 90% of their taxable income to investors in the form of dividends, providing a steady stream of income.
• High returns: Historically, REITs have delivered competitive total returns, outperforming other stock market indices like the S&P 500 over the long term.
• Liquidity: Publicly traded REITs are easily bought and sold on major stock exchanges, providing greater liquidity compared to investing directly in real estate.
• Diversification: Including REITs in an investment portfolio can help reduce overall risk and increase returns due to their low correlation with other assets.
• Lower volatility: Due to their large dividends, REITs tend to be less volatile than traditional stocks, providing a hedge against market fluctuations.

However, there are also some considerations to keep in mind:

• Heavy debt: REITs often carry a significant amount of debt, which can be a concern for investors.
• Low growth and capital appreciation: Since REITs distribute most of their profits as dividends, they may have limited funds for reinvestment and growth.
• Tax implications: While REIT companies are exempt from corporate taxes, investors are still required to pay taxes on the dividends they receive.

Overall, REITs provide a convenient and accessible way to invest in real estate, offering steady income, high returns, and diversification to investors.

Short-term notes

Short-term paper is a broad category of unsecured debt, though it may be backed by assets such as securities or loans issued by a corporation. They are issued by governments, corporations, and financial institutions and are a common form of financing for daily operations.

Examples of short-term paper include commercial paper, short-term treasuries, and promissory notes. They are usually issued with a minimum denomination of $25,000, meaning the main investors are institutional investors.

Short-term paper is an attractive opportunity for investors as it is a better alternative to holding cash in a bank account, as it provides a return. It is also highly liquid, allowing investors to access funds if needed.

Frequently asked questions