Guaranteed 10% Returns: Safe Investment Strategies For Beginners

There is no such thing as a guaranteed return on investment. Even U.S. Treasury bills, which are about as safe an investment as you can get, come with some risk. That said, there are investments that can offer a 10% return or higher.

The first step to achieving a 10% return is to understand the concept of return on investment (ROI). ROI is a financial metric used to measure the possibility of gaining a return from an investment based on its past performance. It is calculated by subtracting the cost of investment from the current value of the investment, then dividing it by the cost of investment.

There are several investments that can offer a 10% return or more. These include:

- Long-term stock investing

- Peer-to-peer lending

- Employer-sponsored 401(k)

- Private credit

- Paying down high-interest loans

- Index funds

- Junk bonds

- Fine art and collectibles

- Real estate investment trusts (REITs)

- Buying an existing business

- Cryptocurrency

- Collectibles

- High-yield bonds

- Dividend stocks

- Closed-end funds

- Midstream energy infrastructure

Long-term stock investing

There are multiple ways to take advantage of the stock market's earning power. A low-cost growth fund is the simplest way for most investors. Growth funds invest in companies that fund managers believe have the potential for significant, sustainable growth. While risky, these investments can experience exponential growth compared to the overall market. For example, the Baron Partners Fund Retail Shares have had average annual returns of 0.04% over three years, 23.82% over five years, and 18.06% over ten years.

If growth funds are too risky for you, a broad index fund can produce returns above 10%, albeit less consistently. A fund like Fidelity's 500 Index Fund is a good compromise, with annual returns of 9.58%, 14.98%, and 13.14% over three, five, and ten years, respectively.

Another option is a dividend fund. Reinvesting the dividends can easily bring your return to more than 10% now and provide income in the future.

When investing in the stock market, it is important to adopt a long-term perspective and avoid the "get in, get out" mentality of quickly trying to profit from trades. A good strategy for long-term investing is dollar-cost averaging, which involves putting a set amount away periodically, regardless of market conditions. This strategy helps investors ignore the "noise" and focus on a disciplined approach.

Additionally, it is crucial to do your own research and analysis of a company before investing, rather than chasing "hot tips" from others. Understanding what the company does, how it makes money, and its future potential are key factors to consider.

Peer-to-peer lending

As a result, lenders can earn higher returns compared to savings and investment products offered by banks, while borrowers can access capital at lower interest rates than those offered by traditional lenders.

P2P lending companies provide an online investment platform that enables borrowers to attract lenders and investors to identify and purchase loans that meet their investment criteria. Lenders can choose which borrowers to lend to, thereby mitigating the risk of bad debt.

The interest rates can be set by lenders who compete for the lowest rate on the reverse auction model or fixed by the intermediary company based on an analysis of the borrower's credit.

There is a risk of the borrower defaulting on the loan. While lenders can choose which borrowers to lend to in order to mitigate this risk, loans are not normally protected by government guarantee. In the US, for example, peer-to-peer lending is treated legally as an investment, and the repayment in the case of borrower defaulting is not guaranteed by the federal government.

P2P lending offers individuals the opportunity to become lenders and earn interest on their money. It also provides an alternative borrowing option for individuals or businesses who are unable to access loans through traditional banks or financial institutions.

Typical returns for P2P investors per year average about 5% to 9%. However, some investors see returns of 10% or more. Returns will depend on the level of risk you are willing to take on. The higher the risk, the higher the potential return.

To get started with P2P lending, you will need to meet certain qualifications, such as living in a state that allows it and having a certain level of verified income. You will also need a bank account.

Once you have found a P2P lending platform that meets your requirements, you can start investing in loans that meet your criteria. You can either choose these loans manually or use the platform's automated investing feature to select loans on your behalf.

There is a risk of losing money if the borrower defaults on the loan. Additionally, you will need to complete a tax form when you file your taxes each year, as returns are taxed as regular income. There may also be a lack of liquidity, with money locked up for the duration of the loan term.

Art and collectibles

While there is no such thing as a guaranteed return on investment, art and collectibles can be a good way to diversify your portfolio and there are a few ways to make around 10% returns. Art and collectibles are considered alternative investments, which means they are not stocks, bonds, mutual funds, exchange-traded funds (ETFs), or cash.

• Begin with what interests you. Creating a diversified collection takes time, so make sure you enjoy what you collect.
• Study the specific collectibles ecosystem. Look for authoritative sources, such as auction houses, insurers, established publications, websites, and other reputable voices in the industry as part of your research.
• Start small. Go to shops or join social media chat groups focused on the collectible you like to talk and build a rapport with people who have experience in the market.
• Be prepared for the costs of maintenance, storage, security, and insurance. These costs can be significant, especially if you have valuable items.
• Proper storage and insurance are a must to protect your collection.
• Beware of fakes and replicas.
• Keep all documentation, including original packaging, sales receipts, and any other proof of authenticity, in a safe place separate from your collection.
• Consider the demand for the item. Limited-edition or rare items tend to be more sought-after and have a higher value.
• Work with a financial advisor to include your collection in your investment portfolio and get it appraised annually.

Some specific types of art and collectibles that have been mentioned as good investments include:

• Prints and editions, particularly by well-known artists such as Andy Warhol, David Hockney, and Damien Hirst.
• Art sold through online marketplaces, which can offer better deals than galleries and auction houses.
• Contemporary art, which has outperformed the S&P 500 by 3.6% per year over the last 27 years and has been an excellent inflation hedge.
• Art by Banksy, which has been described as a desirable investment asset that is fun and can yield profits.
• Limited-edition art pieces, such as art prints, sculptures, or paintings.

Real estate

Advantages of Real Estate Investment

• Cash flow: Real estate can provide a steady income stream through rent collection.
• Tax breaks: There are often tax advantages associated with real estate investments, such as deductions and write-offs.
• Leverage: Real estate offers the opportunity to leverage your money by using debt to finance a property purchase.
• Inflation hedge: Historically, real estate has been a good store of value during periods of high inflation.

Disadvantages of Real Estate Investment

• Barrier to entry: Buying properties can be costly, requiring substantial upfront capital.
• Volatility: Real estate markets can be volatile, and values can fluctuate significantly.
• Management: Managing rental properties can be time-consuming and challenging, especially for first-time investors.

Ways to Invest in Real Estate

• Direct property ownership: You can purchase properties directly, such as single-family homes, multi-family residences, office spaces, or land. This option provides more tax breaks and control over your investment but requires a higher upfront investment.
• Real Estate Investment Trusts (REITs): REITs allow you to invest in the real estate market without the hassle of managing properties. You can buy REITs on the stock market through a broker. While they offer a good rate of return, they may overexpose you to specific real estate subsets and are highly sensitive to interest rate changes.
• Real estate crowdfunding platforms: These platforms, such as Arrived or Yieldstreet, allow you to invest in real estate with a smaller upfront investment. They pool capital from multiple investors to purchase and manage investment properties.
• Hard money lending: You can become a private money lender, providing capital to property flippers and wholesalers. This option typically offers higher returns (12-15%) but comes with the risk of losing your investment if the project fails to turn a profit.

Diversification

It is important to diversify your investments to manage risk effectively. Consider allocating your funds across different types of real estate, such as residential, commercial, and industrial properties, and in various locations to minimise the impact of local market fluctuations.

Additionally, real estate should be part of a broader investment portfolio that includes other asset classes, such as stocks, bonds, and alternative investments. This diversification will help protect your overall financial position if the real estate market experiences a downturn.

High-yield bonds

Because of the additional risk associated with high-yield bonds, investors also have the potential to earn higher returns compared to safer bonds. Yields for these non-investment-grade bonds are higher than government bonds, meaning investors can earn more income relative to the price they paid for the bonds.

• Vanguard High-Yield Corporate Fund (VWEHX)
• IShares iBoxx $ High Yield Corporate Bond ETF (HYG)
• JPMorgan BetaBuilders USD High Yield Corporate Bond ETF (BBHY)
• SPDR Portfolio High Yield Bond ETF (SPHY)
• VanEck High Yield Muni ETF (HYD)

Mutual funds and ETFs are some of the easiest ways to get exposure to high-yield bonds. However, high-yield bond investors may suffer during economic downturns or recessions as more issuers default because they can't make their interest payments. Yields may widen, sending bond prices lower as investors look for additional returns to compensate for the higher risk.

Frequently asked questions