Lucrative Investments Offering 3% Returns And Beyond

There are several investment options that can yield a 3% return. These include certificates of deposit (CDs), money market funds, and government-backed securities such as U.S. Treasury bills, notes, and bonds. While a 3% yield may not seem like a significant return, it can be considered respectable in today's economic climate, allowing investors to stay ahead of inflation. For those seeking higher returns, dividend-paying stocks and funds, as well as investment-grade corporate bonds, can offer moderate to high returns but carry a higher level of risk.

High-yield savings accounts

• Interest Rate: Look at the rate being offered and how long it lasts. Some banks may offer a promotional rate that expires after a certain period.
• Initial Deposit: Some banks require a minimum deposit to open an account, which can range from $5 to $100 or even higher.
• Minimum Balance: Understand the minimum balance required to avoid service fees and earn the maximum annual percentage yield (APY).
• Fees: While many high-yield savings accounts have no fees, some do. Be sure to know the fee structure, including any monthly maintenance fees, which typically range from $5 to $20.
• Compounding Interest: Find out how often interest is compounded (daily, monthly, or yearly) as this can significantly impact your earnings.
• UFB Direct High Yield Savings: 5.25% APY, no monthly fee, no minimum balance requirements, and 24/7 customer support.
• Laurel Road High Yield Savings: 5.15% APY, no monthly fees or balance requirements, and extended weekday customer support hours.
• Varo Savings Account: 3.00% APY, with the potential to earn 5.00% APY on balances up to $5,000 if certain requirements are met. Offers automated savings tools.
• LendingClub Bank High-Yield Savings: 5.00% APY, no monthly fees, and a free ATM card. Requires a $100 minimum opening deposit but no minimum balance after that.
• Bask Bank Interest Savings Account: 5.10% APY, no monthly fees, no minimum balance or deposit requirement. However, there is no ATM access or debit card offered with this account.
• TAB Bank High Yield Savings: 5.27% APY, no monthly maintenance fee, and no minimum deposit required to open the account.

Certificates of Deposit (CDs)

Once your CD matures, you will have access to the amount you deposited, as well as the interest you've earned. One big difference between a CD and a traditional savings account is that you cannot touch the money in a CD during the term. You can only deposit money into the CD once at the beginning of the term and cannot make additional contributions.

CDs are considered safe investments because when you opt to open a CD at a bank or credit union that's insured by the Federal Deposit Insurance Corporation (FDIC) or National Credit Union Association (NCUA), they're considered deposit accounts, which means they're covered up to $250,000 per account holder.

CDs can be a good investment option if you have savings that you don't need for a while. They are also a good option if you want to keep your money safe for a few months to several years. The early-withdrawal penalty on a CD encourages you to keep your money in the bank rather than spend it.

CD interest rates generally go up as the term increases. Common time periods for CDs are three, six, 12, 24, or 60 months. Take care not to sign up for a CD with a maturity date that is too far in the future. You don't want your money tied up when you need it, especially as it'll cost you to withdraw it early.

CD interest rates are typically lower than investment returns from the stock market, but CDs are insured up to the FDIC insurance limit. That's why a certificate of deposit is a great tool for storing a down payment for a home or another far-away financial goal or purchase.

However, while a CD could be a good savings tool for many scenarios, there are a lot of reasons you may not want to put your money in a CD. It depends on your financial needs and some external market conditions. For example, in the current interest rate environment, some high-yield savings accounts pay better interest rates than CDs.

Additionally, CD interest rates are locked in and don't account for inflation. CDs are also illiquid, so you cannot easily access funds without penalties.

Money market mutual funds

Money market funds are not the same as money market accounts (MMAs). Money market funds are investment products sponsored by investment fund companies, while money market accounts are interest-earning savings accounts offered by financial institutions and insured by the Federal Deposit Insurance Corporation (FDIC).

Money market funds can be further classified into different types, including:

• Prime Money Funds: These invest in floating-rate debt and commercial paper of non-Treasury assets, such as those issued by corporations, U.S. government agencies, and government-sponsored enterprises.
• Government Money Funds: These funds invest primarily in cash and U.S. government securities, including Treasury bills, bonds, and notes.
• Municipal Money Funds (Tax-Exempt): These funds invest in short-term municipal securities issued by states, local governments, and municipal agencies. The income generated by these funds is typically exempt from federal income tax and, in some cases, state income taxes.

Money market funds are regulated by the U.S. Securities and Exchange Commission (SEC), which sets guidelines for the characteristics, maturity, and types of allowable investments. These funds aim to maintain a net asset value (NAV) of $1 per share and are known for their stability and regular income generation. However, they are sensitive to interest rate fluctuations, which can impact overall returns.

While money market funds offer low capital appreciation, they are considered a safe and liquid investment option for investors, particularly for short-term financial goals.

Investment-grade corporate bonds

Investment-grade corporate bond funds, such as those offered by iShares, provide access to a broad range of high-quality corporate bonds in a single fund. For example, the iShares iBoxx $ Investment Grade Corporate Bond ETF offers exposure to over 1000 corporate bonds, with the goal of providing stability and income for investors. Similarly, the iShares 1-5 Year Investment Grade Corporate Bond ETF provides targeted access to short-term investment-grade corporate bonds with maturities between one and five years.

By investing in investment-grade corporate bonds, investors can gain exposure to corporate debt with lower credit risk while earning a consistent yield. This type of investment is suitable for those seeking stable income and willing to accept the associated risks.

Dividend aristocrats

To be a Dividend Aristocrat, a company must have 25+ consecutive years of dividend increases and meet certain minimum size and liquidity requirements. There are currently 68 Dividend Aristocrats, including:

• Chevron: One of the world's biggest oil and gas companies, and the only energy company included in the Dow Jones Industrial Average.
• Abbott Laboratories: One of the most recognizable healthcare product providers globally, developing and distributing nutritional products, medical testing and monitoring devices, and diagnostics equipment.
• General Dynamics Corp: Provides aerospace and defence vehicles, AI solutions for defence and cybersecurity initiatives, and secure mass-communication services.

Other examples of Dividend Aristocrats include Johnson & Johnson, Medtronic, and PPG Industries.

Frequently asked questions