If you have been accustomed to high-yield savings accounts for several years now, you may be ready to assess your options and familiarize yourself with a number of alternatives. It can be difficult to know where to begin, especially if you are largely unaware of what your current options are, but by doing your research and expanding upon your existing knowledge and understanding of savings accounts, you can come to an informed conclusion. If you have made the decision to wave goodbye to high-yield savings accounts and are interested in knowing how the market has changed during the past couple of years, continue reading to find out everything you need to know.
- Dividend stocks
In the wider business world, large companies and global conglomerates tend to pay dividends on their stocks. This is, in the very simplest of terms, the process of distributing profits from a corporation to a shareholder with a proportion of company profits paid as a dividend to shareholders and any monetary amount not distributed re-invested back into the business. It is an increasingly popular choice for its potential for capital appreciation so if you are earning a solid dividend yield, the value of the underlying stock can rise in line with your earnings and provide you with something of a double-edged gain. If you are interested in dividend stocks, NASDAQ is home to an exhaustive list of dividend stocks including scores that pay over 5%.
- CD ladder
If you are an inexperienced investor, you may have not considered a CD ladder as opposed to a high-yield savings account. It is, essentially, a strategy in which an investor decides to divide a sum of money into equal amounts before investing them into CDs, or certificates of deposits, with varying maturity dates. It is an increasingly popular choice and can lead to lower interest rates and decreased reinvestment risks by offering a fixed interest rate for a predetermined period of time with the invested funds locked in until the maturity date of the CD which can be three, six, or 12 months, although five years may also be an option. If you are considering a CD ladder, it may benefit you to familiarize yourself with the various different interest rates offered during different time periods with CD ladder getting its name from the strategy that investors follow.
- Preferred stocks
If you have your sights set on stocks, preferred stocks may also be a viable option for you. It is, put simply, a type of stock that provides different rights to shareholders than a common stock might by receiving regular dividends that are repaid first in the event of a bankruptcy or merger. They are also similar to dividend stocks in that they also provide a strong return as well as the potential for capital appreciation. It is its first-class safety and security, however, that has led to it becoming a popular choice amongst investors in recent years with preferred stocks paid before common stocks. It, however, typically does not include the right to vote at a company’s annual stockholders’ meeting and its market price is interest-rate sensitive so may end up rapidly declining despite sharply rising interest rates.
- Peer-to-peer lending
In the past decade, the popularity of peer-to-peer lending, or P2P lending, has grown exponentially for a number of reasons. It, for example, tends to lead to greater investment leads than that of traditional investments and, as a result, is widely considered to favor the investor. It is, after all, the process of providing the funds that borrowers rely on for loans with no third-party or middle-man to rob you of high returns. In the eyes of the lender, on the other hand, peer-to-peer lending can also provide a higher return than what may be currently available through alternative investments, such as high-yield savings accounts, deposit accounts, and bonds, with the option to choose the level of risk that you are prepared to accept. If you were to repay a peer-to-peer loan early as a borrower, your return may also be lower than previously expected.
If you have done your research and made your mind up and are now on the hunt for a number of alternatives to high-yield savings accounts, it may be worth taking the time to assess your options ahead of time. This includes dividend stocks where cash or stock is distributed by a corporation to its shareholders, CD ladders where an investor decides to divide a sum of money into equal amounts before investing them into CDs with varying maturity dates, preferred stocks that provide different rights to shareholders than common stocks, and, last but certainly not least, peer-to-peer lending which can provide the funds that borrowers rely on for loans with no third-party or middle-man to rob you of high returns.