Finding Yield In A Low-Return Environment
It happens every time interest rates hover in the basement: investors hungry for income search for creative (and usually risky) ways to get more yield in their portfolio. Many of the traditional havens of income-oriented investors (like financial stocks and real estate) have been hit hard. Nonetheless, it’s still possible to earn a decent yield in today’s market.
Reaching For Yield
FDIC Insured CD’s usually aren’t the first thing that comes to mind when you think of “high yield,” but it’s still possible to find a decent-yielding CD, and CD’s do have certain advantages not shared by many other investments (such as FDIC insurance). The key to finding the highest interest CD is to use website like Bankrate.com or BestCashCow.com to scour the internet for deals nationwide so you are no longer limited by what your local banks are offering.
Municipal bonds are another oft-overlooked investment. The best municipal bonds are save and currently pay taxable-equivalent yields significantly above what U.S. treasury bonds are currently paying. It is true that some states, such as California, are in dire financial straits and are in danger of defaulting on their bonds, but most states are still relatively healthy, and diversification can help minimize these default risks.
Real Estate Investment Trusts (REITS) are perennial favorites of income investors, and thanks to massive losses in the real estate bust, now sport a reasonable yield. Most REIT experts would like to see them yielding in the 6-7% range, but the mid 4′s are a far cry better than the lows seen at the peak of the real estate bubble. REIT dividends also have the advantage of rising with inflation over long periods of time.
Financial Stocks are risky, no doubt about that. But the banks who managed to survive the crisis are likely to benefit tremendously from the industry consolidation. Wells Fargo, for example, got Wachovia for an absurdly-low price. Risk-tolerant investors will likely be richly rewarded for picking through the wreckage of the financial sector. This is probably best done through a mutual fund or ETF, though.
Related posts:
- Examining High Return Investments
- Dividend Yield Definition and Ex Dividend Definition
- Five Ways To Get Ahead In A Declining Market
- How to Find the Highest Dividend Paying Stocks
- Lowes is Too Low