Investments Offering Weekly Windfalls

There are a variety of investment options that can yield a 5% return or more. While there is no entirely risk-free way to consistently generate a 5% return, diversifying your portfolio across several asset classes can help you achieve this goal. Here are some options to consider:

- Stocks, Mutual Funds, and ETFs: Historical data shows that the S&P 500 has delivered an average annual return of 10% since its inception. Investing in individual stocks can be risky, but mutual funds and ETFs offer diversification and lower fees.

- Bonds and Bond Mutual Funds: While individual bonds may not provide a 5% return, they can still be a stable investment option, especially municipal bonds, which often offer yields above 5% and tax benefits.

- Real Estate Investment Trusts (REITs): REITs allow you to invest in real estate without the hassle of direct ownership. They have delivered strong returns over the years, with an average annual return of 16.1% over the past 10 years, according to the MSCI US REIT Index.

- Peer-to-Peer Lending Platforms: Platforms like LendingClub offer the potential for returns above 5% by connecting borrowers with investors.

- High-Yield Savings Accounts and CDs: While bank investments typically offer low returns, online banks like Ally Bank and Synchrony Bank provide higher APYs on their CDs, getting you closer to the 5% mark.

- Annuities: Fixed-indexed annuities (FIAs) offer a combination of fixed income and potential stock market gains. While complex, they can provide a guaranteed principal and protect against losses during market downturns.

- Dividend Stocks: Some dividend-paying stocks offer yields of 5% or more. Examples include Ares Capital Corp. (ARCC) and Canadian Imperial Bank of Commerce (CM).

Stocks, Mutual Funds and ETFs

While it is not possible to guarantee a 5% return every week, there are investments that can provide a 5% annual yield or higher.

For example, money market mutual funds are currently offering a 5.13% average yield, with the best funds offering returns of around 5.5% to 6%. These include the Invesco Premier Portfolio Institutional (IPPXX) and the Vanguard Treasury Money Market Fund (VUSXX). However, these are annual returns, and weekly returns of 5% are unlikely.

If you are looking for higher returns, you could consider high-yield stocks and bonds. For example, some real estate investment trusts (REITs), especially those that own hotel properties, can pay more than 6%. Hospitality Properties Trust, for instance, has a dividend yield of 6.4%. Energy master limited partnerships (MLPs) can also offer high yields, such as Enterprise Products Partners, which has a dividend yield of 5.7%.

Exchange-traded funds (ETFs) that focus on high-yielding securities can also provide returns of 5% or more. For example, the Global X SuperDividend ETF (SDIV) has a dividend yield of 12.89%, while the Invesco Preferred ETF (PGX) has a dividend yield of 5.44%.

It is important to note that higher yields often come with higher risks. Before investing, be sure to do your research and understand the potential risks and returns of any investment.

Bonds and Bond Mutual Funds

If you're hoping for a 5% return, individual bonds may not be the best option. In fact, financial advisor Anthony Montenegro of the Blackmont Group says that some bonds can even provide a negative return. Most people invest in bonds for the income benefit and to avoid the dramatic ups and downs of the stock market.

As a bondholder, you're lending money to a corporation or municipality, and they pay you from their revenue. While bonds are offered in nearly every industry, some investors prefer municipal bonds as they often provide yields of over 5% and are usually tax-free at the federal level.

• BlackRock MuniYield
• Invesco Value Muni Income
• Nuveen AMT-Free Municipal Credit Income
• Nuveen Quality Muni Income
• Invesco Muni Investment Grade

You can also invest in high-yield bond portfolios, but it's important to understand that these are generally made up of lower-quality bonds and are thus subject to higher levels of risk. Here are some examples of high-yield bond portfolios:

• Fidelity Capital & Income Fund (FAGIX) – 4.01% yield with a 0.67% expense ratio
• Vanguard High Yield Corporate Fund Investor Shares (VWEHX) – 8.22% yield since inception with a 0.23% expense ratio
• BlackRock High Yield Bond Fund (BHYIX) – 7.22% yield since inception with a 0.62% expense ratio

Bond Mutual Funds

If you're looking for a more hands-off approach, you might consider investing in bond mutual funds or exchange-traded funds (ETFs). With these investment vehicles, you put your money into a pool with other investors, and a professional invests that pool of money on your behalf.

Bond mutual funds and ETFs can make it easier to achieve broad diversification with a lower dollar commitment, but they offer less control than investing in individual bonds. They also typically charge expense ratios, which are levied on an ongoing basis, and you may face additional transaction or sales fees.

• IShares Core Total USD Bond Market ETF (IUSB)
• IShares Core US Aggregate Bond ETF (AGG)
• JPMorgan Core Bond (JCBUX)
• JPMorgan Government Bond (HLGAX)
• JPMorgan Limited Duration Bond ETF (JPLD)
• JPMorgan Mortgage-Backed Securities (JMBUX)

Real Estate Investment Trusts (REITs)

REITs are required to pay out at least 90% of their taxable income to shareholders each year, and most pay out 100%. Shareholders then pay income tax on the dividends they receive. This means that REITs are an excellent way to access dividend-based income.

REITs invest in a wide range of property types, including offices, apartment buildings, warehouses, retail centers, medical facilities, data centers, cell towers, infrastructure, and hotels. Most REITs focus on a particular 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 own and manage income-producing real estate, and they are the most common type of REIT. Mortgage REITs lend money to real estate owners and operators, either directly through mortgages and loans, or indirectly by acquiring mortgage-backed securities. Hybrid REITs use a combination of these investment strategies.

REITs can be publicly traded, publicly non-listed, or private. Publicly traded REITs are the most common, as they are easy to buy and sell, and tend to have better governance standards and more transparency. Public non-listed REITs are registered with the SEC but do not trade on national stock exchanges, making them less liquid. Private REITs are exempt from SEC registration and do not trade on national stock exchanges, so they are generally only available to institutional investors.

REITs offer several advantages, including steady dividends, high returns, liquidity, and lower volatility. However, there are also some disadvantages, such as heavy debt, low growth and capital appreciation, tax burdens, and high fees for non-traded and private REITs.

When considering investing in REITs, it is important to remember that they are subject to market risk and potential high management and transaction fees. Additionally, REITs should be held for the long term to realize potential gains.

Peer-to-Peer Lending

P2P lending is a good option for those who may struggle to qualify for loans from traditional banks and lenders. P2P lenders have more relaxed borrower requirements, making it more likely that you’ll qualify for a loan. They can also be a good fit for those who need to borrow money but are ineligible for other types of financing. For example, entrepreneurs launching small businesses are unlikely to qualify for traditional business loans, so P2P loans can be a valuable alternative.

The rates for applicants with good credit are often lower than comparable bank rates, while rates for applicants with poor credit records may be much higher. The average credit card interest rate was 21.19% as of December 7, 2023, according to the Federal Reserve. In comparison, LendingTree.com listed personal loan rates from 6.40% to 36% as of December 4, 2023.

P2P lending is a good option for investors to generate interest income on their cash at a rate that exceeds those offered by conventional savings accounts or certificates of deposit (CDs). Some P2P sites allow lenders to start with an account balance of as little as $25.

However, people who wish to lend money through a P2P lending site need to consider the possibility of default. Research on P2P lending platforms has indicated that defaults are much more common than those facing traditional financial institutions, sometimes exceeding 10%.

Additionally, there are various fees associated with P2P lending. Every site makes money differently, but fees and commissions may be charged to the lender, the borrower, or both. Like banks, the sites may charge loan origination fees, late fees, and bounced-payment fees.

Annuities

There are several types of annuities, but three main types are defined by their potential returns:

• Fixed annuities guarantee a minimum rate of return on the principal and pay out over a fixed period.
• Variable annuities invest in various investments, typically mutual funds, so returns depend on how these investments perform.
• Indexed annuities offer returns that track an index such as the Standard & Poor's 500 Index.
• Deferred annuities pay out at a future point in time, with the client paying into the annuity over a period of time, often decades.
• Immediate payment annuities begin paying out as soon as a lump sum is deposited.

While it is not possible to earn a guaranteed and risk-free return of 5% or higher, it may be possible to achieve this level of return by investing in a combination of fixed-income investments and stocks or real estate. For example, investing half your portfolio in fixed-income investments paying 2% and the other half in stocks or a REIT averaging 10% would result in a blended average return of 6%.

When considering annuities, it is important to remember that they are complex and may not be suitable for everyone. It is recommended to consult a fee-only financial advisor to ensure you understand the risks and potential benefits.

Frequently asked questions