Lately, I’ve heard a lot of buzz about how peer-to-peer (P2P) lending is a great alternative for investors who feel burned by the stock market. Proponents of peer-to-peer lending say it’s a smart way to get a good return on your money without the risk of a failing economy. But before you pull up stakes in your index funds and hightail it for the nearest P2P lending site, let’s take a closer look at the pros and cons.
Note: Over the weekend, Trent at The Simple Dollar also offered his thoughts on peer-to-peer lending.
A Brief Intro to Peer-to-Peer Lending
In its oldest, simplest form, peer-to-peer lending is what happens when you loan your mom money to start her new hairdressing business, or borrow funds from a friend for a down payment on your new truck. You’re making or taking the loan based on your relationship with the person, which counts for more than their credit rating or collateral.
Sometimes loans to friends and family work out well, but often they don’t. They’ve funded many dreams, but they’re also famous for breaking apart families and friendships that have stood the test of decades. An old saying goes, “Never loan money to friends. You’ll lose your money and your friends.”
In its modern incarnation, peer-to-peer lending has gone online, where it’s become a big business. Third-party websites match lenders to borrowers, in an attempt to make both parties feel more at ease.
Borrowers at peer-to-peer lending sites get better interest rates and loan terms than they would from a commercial bank. The lending sites will only work with you if your credit score is in the mid-600s or higher, but the terms you’ll be offered are better than most banks.
As a lender, you get to know something about the borrower before you lend your money, which builds trust and feels good. But if the loan doesn’t work out and you lose your cash, at least you don’t have to face the deadbeat over Thanksgiving dinner every year for the rest of time.
Peer-to-peer lending has gained a lot of attention because of its purportedly fabulous returns. Lending Club is advertising investor rates of return in the 9% range. Prosper says their returns are slightly over 10%. That’s an order of magnitude better than the return I’m getting on my savings account. Where can I sign up?
The Complete Idiot’s Guide to Peer-to-Peer Lending
To learn more about peer-to-peer lending, I recently interviewed Beverly Harzog, co-author of The Complete Idiot’s Guide To Peer-to-Peer Lending. She had some words of caution before I chase after this pot of gold. Peer-to-peer lending can be great, she said, but it’s not without pitfalls.
“It’s very risky. It’s like investing in the stock market. Everybody may have great intentions, but when you’re lending this money, you have to be prepared to lose it,” Harzog said.
Her bottom line: Don’t invest any money you can’t afford to lose. This might be a good investment, but it’s not an a sure-fire way to make a mint. It’s an at-risk investment just like stocks.
Unlike in the stock market, you’re funding loans. The borrowers have a legal commitment to pay you back at the interest rate you agreed to. If they don’t, the website that set up the loan will pursue your funds through a collection agency. In theory, this should make these investments more secure than stocks, but Herzog warns that you can still lose your money.
To combat that, she suggests lenders diversify their risks, just as they would with stocks. Don’t put $1,000 into one loan. Put $100 into 10 different loans. It’s unlikely they’ll all default, and you’ll earn a nice rate on most of your money that way. You can also choose to only partially fund a loan; when several people fund a single loan, everyone shoulders a bit of risk instead of one person taking it all.
As another incentive, you’ll earn the warm cozy feel that comes from directly helping others. Harzog says this feeling of reaching out and helping is what draws many investors into peer-to-peer lending.
“There’s an element of people helping people that’s just so appealing,” Harzog said. “It’s a very feel-good thing.”
If you want to try peer-to-peer lending, Harzog strongly recommends sticking with the big sites like Lending Club and Prosper. You can start out as a lender at Lending Club for as little as $100. That’s a low bar to entry for new investors. Harzog has seen a lot of smaller sites come and go, while the big ones now have enough gravity to stick around.
Creative Uses for Cash
There are some smaller sites worth noting, though. Some people are putting the basic concept of peer-to-peer lending to incredibly creative uses.
Some sites, like Green Note and People Capital specialize in funding student loans.
At sites like Kiva, you can help women in the developing world start their own businesses.
At Kickstarter.com, you can give money to creative projects ranging from film products to entrepreneurial gadgets. Kickstarter is more about donations than loans, but many of the Kickstarter projects offer a small return in the form of copies of the creative work produced, or your own personal widget when they get made.
These creative sites might not offer the returns a big site like Lending Club does, but they’re fun, interesting uses of the concept. They let you participate for very little money. You can take $25 to Kiva or Kickstarter and invest it in someone’s new business. And at Kickstarter, you’ll get a funky wristwatch or a new folk album, depending on what you invested in. (J.D. helped fund Kind of Bloop, an 8-bit Miles Davis tribute album.)
At this point, I’m intrigued enough by peer-to-peer lending that I’d like to try it. There’s just one catch: I can’t. At least, I can’t play with the big fish. Both Lending Club and Prosper are only available to lenders in certain states, and I don’t live in one of the eligible areas.
Have you tried peer-to-peer lending? What was your experience like? Are you tempted to try it? If not, what holds you back?
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It is no secret that the internet is changing how money is made forever.
This has caused a boom in many businesses and people the ability to make money online, which is a huge benefit for you!
This trend will only continue as technology improves. If it feels daunting to jump onto this new bandwagon right now, don’t worry; we have some tips that can help you double your 10k in the next few weeks or years.
I am going to show you how to double your money so that you can retire early, pay off debt and invest in the stock market.
A lot of people would say this is impossible, but I’m not just showing it–I’m proving it!
We all have said it takes money to make money and while that is true. It is easy to start doubling your money with just $10K.
What if, right now, you decided to double your 10K by the end of the year? Maybe, you want to hit a major goal and make a huge change in only 8 short weeks?
Making money is not a difficult task. Too often, people become impatient and think that they can simply make money without putting in the effort. This is not true.
Cash is a tool and nothing more. Once you understand this concept, you can begin to figure out how to make more money. Additionally, it’s important to appreciate that it takes time to make money – don’t expect to become a millionaire overnight.
Here is a realistic guide to help you work towards that goal.
Be sure to decide which strategic way to double $10k quickly works best for your personality.
The 10K of your dreams seems impossible.
How can I double $10000 fast?
There is no one-size-fits-all answer to this question, as the best way to double your money will vary depending on your individual circumstances and goals. However, some general tips include developing a growth mindset around money, finding ways to make more money, and investing in yourself and your skills.
Keep in mind that $10,000 is not a lot of money to double in a short period of time.
How long does it take to double 10k?
The answer to this question is dependent on a number of factors.
The most important factor is the amount of time it takes for your investments to double.
If you are investing in stocks, you can quickly double 10K with an options contract within 2-3 days. If you are looking at other avenues, it will depend on how you choose to double your money.
Typically, people start seeing results in approximately 4 to 6 months to double 10k.
If your eyes are set on this, then make sure to write down one of the millionaire quotes for motivation.
What to do with 10k?
Now that you’ve earned an extra 10k, you may be wondering what to do with it.
You could save it, spend it, or invest it, but there are a few other things you could do as well.
Here are some ideas on how to make the most of your money and grow it even more.
How can I Double my Money?
There are many ways you can double your money in a short amount of time.
I am passionate about exploring the best ways to make money online. In this article, I will share some tips on how you can double your money relatively quickly. However, please keep in mind that these are general ideas to get you started.
Specifically How to Double 10k Quickly?
If you are serious about how to double your 10k fast, you will need to dedicate time on a regular basis to the tasks needed to reach your ambition. The key is to do it daily in order to keep the momentum of your progress going.
Earning money is a mindset.
To double 10k quickly, learn how to change your mindset about money.
Although doubling $10,000 may seem difficult, it can be done with the right approach.
If you have $10,000 and want to double it within a month or a few months, here are a few realistic strategies to help you reach your goal.
Idea #1 – Swing Trading with Stocks
Swing trading is a technique that allows investors to hold onto stocks for a period of time, typically two to four days. During this time, the trader watches for specific price patterns and buys or sells shares based on their analysis.
One former assistant principal, Teri Ijeoma, changed her life when she left her job as an educator and become an active trader.
Check out: My Personal Trade and Travel Review
This type of trading can be very profitable if done correctly, as it allows the trader to make twice their investment in a short amount of time.
The key is you must learn how to invest in stocks for beginners. This is one step many people overlook when they are focused on doubling their money. Either you will get lucky or you will have a huge loss. Take time and become educated on swing trading stocks.
Related Reading: How Fast Can You Make Money in Stocks?
Idea # 2- Cryptocurrencies
Cryptocurrency is a digital or virtual asset that uses cryptography for secure transactions. Cryptocurrencies are growing in popularity and may become a major part of society. Bitcoin, the first and most well-known cryptocurrency, has seen its value skyrocket in recent years.
Cryptocurrencies are often unstable because they are not regulated by any government or financial institution, and thus their value can change rapidly. However, the potential for reward is high, making cryptocurrency an attractive investment option. Because of this, cryptocurrency investments are often seen as riskier than traditional investments, but also have the potential for greater returns.
Before investing in cryptocurrency, do your research and be sure you understand the risks involved. There are many educational resources available to help you get started.
Idea # 3 – Flip Items for a Profit
Retail arbitrage is a practice where an individual or company purchases a popular product at a discounted price and then resells it for profit at another online retailer. This can be done on marketplaces like Craigslist, eBay, and Facebook Marketplace.
This is a great way to make some extra money on the side. You need some time and a willingness to invest, but if you find the right deals, you can make a good return on your investment.
Many people have great success by flipping items from auctions, free groups, or local goodwill store.
Check Out: Flea Market Flipping
Idea #4 –Resell Products on Amazon FBA
Amazon FBA is a service for independent entrepreneurs who want to start their own e-commerce business. They can offer products on Amazon and work with Amazon directly to fulfill orders, collect payments, and provide customer service. By doing this, they don’t have to worry about the inventory and can focus on other aspects of their business.
This is another avenue for selling your flipping treasures.
There are a few ways to make money through reselling products. You can either find products to sell on Amazon or Ebay, or you can dropship products from a supplier. If you want to find your own products to sell, you’ll need to do some research on what is selling well and what prices are competitive. If you want to dropship, you’ll need to find a supplier and create an account with them.
Idea #5 – Start a Business or Invest in a Franchise Company
Starting a business is not easy. It requires a lot of work and effort, but if you’re willing to put in the time and effort it can be very rewarding.
Starting your own business is one of the most difficult things you can do, but it’s also one of the most rewarding. There are many different businesses you can start that have low overhead costs, so it’s a great way to get started.
Think of the things you enjoy doing or any hobbies you have. Look for business opportunities that line up with your interests. Then, it makes working much easier.
Here are great ways to make money on the side:
It is possible to make more money on your business than you make more money in your current job or career.
Idea # 6 – Real Estate Portfolio
Real estate is a recession-proof business.
There will always be people who need to rent or buy dwellings in boom or bust economic times.
Real estate can be a lucrative investment, but it is not without risk. A lot of people have invested in real estate and lost money, but an investor who does their research and finds a good deal can make a lot of money.
Idea # 7 – Increase Your Income
If you’re not happy with your current income, don’t worry! You can increase it this year.
This is the year that many experts are predicting will see the biggest wage growth in years. So start planning now and you could see a significant increase in your take-home pay.
More than likely, this could be your seed money of $10k to fund the start to doubling your money and making $20k.
Related Reading: How Much Do I Make Per Year?
Idea #8 – Advertise and Gain Clients
If you are a small business owner, then this one is for you. Start advertising as a way to gain more customers.
There are a number of ways to make your services more accessible and appealing to potential clients. One way is to spend money on promotions and advertising. Advertising can be effective in reaching your goals, surpassing your double your money goal of $20,000 in revenue.
There is no doubt that advertising your services will increase the number of customers you have. The more people who know about your business, the more likely they are to use it. And as we all know, the more customers you have, the quicker you earn more money.
It’s a simple equation: More customers equals more money.
Idea # 9 – Invest in Stock Market – ETFs & Index Funds
Investing in the stock market is a process that requires careful consideration and research. Index funds have become an increasingly popular investment option for many investors. ETFs are known as Exchange Traded Funds, which are also a popular investment option.
Both index funds and ETFs provide investors with the ability to invest in a diverse range of stocks, making them ideal for any investor who is looking to diversify their portfolio.
Investing in an index fund is one of the best ways to build wealth over time.
This is probably the slowest way to make money quickly in the stock market, but it comes with less risk.
With a mutual fund, you are essentially investing in many different stocks, which means that you get to choose how much your investments grow each day. This can be a great way to ensure that your money is working for you – and growing – even when you’re not able to actively monitor it yourself.
Just to know, investing in bonds will eventually double your money, but it will take more time as the rate of return is less.
Idea #10 – Start a Mining Farm
Cryptocurrency mining is a process by which new coins are introduced into the market. In order to do this, miners use computers to solve complex mathematical problems in order to receive rewards in the form of new coins. A cryptocurrency mining farm is a way to pool together multiple computers in order to increase the chances of solving these problems and receiving rewards.
Starting a mining farm is a process of investing in cryptocurrency or blockchain technology.
Mining farms can be started with as little as $500, and they are commonly used to mine cryptocurrencies like Bitcoin, Ethereum, and ZCash. Although the process of mining cryptocurrency is not always easy, it can be lucrative for those who invest in the process.
Starting a cryptocurrency mining farm can be lucrative, but it’s important to do your research first. The farm will require a lot of power and will have a rate of return of around 18% (source).
Idea #11 – Share Cash with P2P Loans
Peer-to-peer lending is the act of lending money to borrowers through a P2P lending website. These websites act as an intermediary between lenders and borrowers, and most sites allow you to lend money to a dozen or two applicants. The interest rate you earn on your loan depends on the P2P website you register with, but it typically falls between 3% and 36%.
When considering a P2P loan, it is important to remember that you are entrusting your money to a stranger. Because of this, it is crucial to take the time to review and assess as many applicants as possible in order to find someone who you feel is most likely to pay back their loan.
P2P loans can be arranged without any collateral or credit check.
Idea #12 – Buy Initial Public Offerings
When a company decides to go public, it sells shares of its stock to the public. This is a way for the company to get more money, and it also allows people who invest in the company early on to make a lot of money if the stock prices rise.
The share price of a company can be very volatile when it first goes public. This can lead to significant growth for the company as investors buy and sell shares rapidly. However, this volatility can also lead to losses if the share price falls abruptly.
You must know the underlying stock value before looking at IPOs as a way to double your money. Many current stockholders are required to hold their stocks for a certain number of days after the IPO. Typically, the stock price falls after the hold period expires.
Idea #13 – Make Money with Airbnb
There are a number of ways to make extra money, and renting out a room at Airbnb is one of them. You can also learn how to make money from home by becoming an Airbnb host.
By doing this, you can provide a valuable service to people who are looking for a place to stay, and you can also make some extra money on the side.
Learn how to start hosting with Airbnb today.
Idea #14 – Flip Some Furniture
Flip furniture is very trendy right now. There has been a recent resurgence in popularity for antique and vintage furniture, and people are buying pieces and restoring them themselves. This can be a great way to make additional money without spending a lot of money.
There are a number of ways to quickly turn a profit by flipping furniture.
Spend some time researching the best methods and finding a niche in the market that you can exploit. With a bit of hard work, you can easily double your investment in no time.
When you are looking for furniture to flip, it is important to do your research and become familiar with the different places you can find quality pieces at a low cost. Local antique stores will often have hidden treasures, so be sure to check them out. Additionally, watch for yard sale notices in your area; people are often willing to sell high-quality furniture at a fraction of the price. Finally, estate sales can be a great place to find unique furniture pieces that you can resell for a profit.
There are many ways to sell furniture, but when you are starting out, it is best to use popular platforms like Facebook Marketplace, NextDoor, Craigslist, and others. Once you have more experience, you may want to create a website and online storefront.
This can be a fun and lucrative way to grow your money.
Idea #15 – Pay Off Debt Strategy
This idea of getting out of debt may seem backward, but this is one of the fastest ways to find extra money in your budget.
There is no doubt that paying off your debt is one of the smartest things you can do for your financial future.
Not only does it reduce the amount of interest you are paying each month, but it also frees up more money to save and invest. Additionally, by paying off high-interest debt first, you are essentially making an investment with a very high return rate.
Once your debt is paid off, you can save your first $10000 which you can now use to quickly double to $20000. This will help you achieve your financial goals faster.
Idea #16 – Online Courses & Coaching Programs
Coaching is a huge business – reaching $11 billion in 2022 (source). People are actively searching for coaching and online courses for personal development.
Coaching programs are designed to provide guidance and support for individuals in order to improve their skills, knowledge, or habits. Coaching programs can take the form of one-on-one sessions or group sessions. Some coaching programs are designed for specific topics like career development, personal growth, or relationship issues.
If you don’t want to work one-on-one as a coach, you can create an online course that can be viewed at any time.
If you have passion, you can likely find people that want coaching.
Idea #17 – Buy a Fancy Car and Uber
You could buy a new, luxury car and become an Uber driver. This would allow you to make money while driving people around in your fancy car.
If you’re looking to make some extra money, driving a luxury car for Uber could be a great way to do it. Not only will you make more per trip, but you’ll also get to drive a nicer car. Keep in mind that if you drive full-time, you could easily double your $10,000 investment.
Driving a luxury car for Uber can get you up to 50% more fares. The extra money can be great for those looking to upgrade their lifestyle or simply want to make some extra cash on the side.
If you want to buy a fancy car and use it for Uber, make sure you have the appropriate insurance. This will protect you in case anything happens while driving.
Idea #18 – Learn a New Skill
A new skill can help to increase your income by allowing you to do things that you couldn’t do before. For example, learning how to code can allow you to start a new career in tech or programming.
Additionally, many skills have the potential to double your income quickly if you are able to find a way to use them in high-demand areas.
It is always a good idea to invest in learning new skills.
There are many places where you can learn, including online and in-person courses. The key to success is jumping in with both feet and really dedicating yourself to learning the skill set. Once you have it down, new opportunities for income will be available.
Idea #19 – Work More Overtime
Working overtime is a great way to earn extra money. You can earn up to double-time pay for working more than 8 hours in a day or 40 hours in a week.
Overtime is becoming more common, so be sure to ask your employer if you can work some extra hours.
In order to make $10,000 in one month from overtime, you would need to figure out how many extra hours per work you need to work.
Idea #20 – Some Gambling?
This is the RISKIEST option of all of them. And highly not recommended as a strategic way to double $10k quickly.
Gambling is a way to risk cash in the hopes of making more cash.
While it can be thrilling and exciting, it’s important to remember that gambling is also a form of entertainment that comes with risk. If you’re able to afford it, gambling can be a way to double your money- but be aware that you could also lose everything you put in.
What is the quickest way to double your money?
How to double your money quick is simple. You need to side hustle and start a business.
Also, the stock market is a simple way to double your money with the rule of 72.
Following billionaire morning routines can be helpful in setting up solid habits for success.
How can I double my money in 24 hours?
The answer to this question is simple… Doubling the money in 24 hours is not practical or doable. You might be able to double your money in 24 hours, but it’s also possible that you could lose everything in one day.
Pay attention to scams if you think you can double your money in 24 hours.
You are better off learning how to make 10k a month.
Which investments are the safest and which are the riskiest?
First of all, it depends on your education, experience, and background.
The best way for someone to double their income is by leveraging their time with the right strategies.
Investments that are considered safe are investments that have an average return on investment of about 8-12% per year. Investing in index funds and ETFs typically have a lower risk. Investing in individual stocks is riskier, but they have an average return on investment of about 10-75% per year.
The riskiest option is the idea that you don’t understand how to double your money and you could end up losing more money.
Best Way to Invest 10K
The best way to invest 10,000 is through stocks. Investing in stocks can be risky and make you lose money, but it also has a high potential for gaining value.
As such, this topic needs to be done in more depth to understand how investments in the stock market work. For now, here are some articles to start to understand the returns of stock investing.
Learn all of the ways you can learn how to invest 10k.
You must do your research on companies, know your risk tolerance, understand the volatility of the markets, and be wary of the news.
Which Strategic Ways on How to Double my Money Quickly will you Pick?
You can choose from many classic way and options, but here are a few that we think would be the most effective.
Thankfully, there are many ways to make money online. But when it comes to making a quick buck, which approach should you take?
In this post, we have outlined the 20 popular routes to double your $10k fast. Your retirement plan relies on your investment of 10k.
However, any of these options is a time-consuming process that takes a lot of hard work and dedication. So, you cannot quit halfway through when things get tough.
This is what you want to do in order to be financially secure and take care of all your needs.
Be successful in doubling your 10k by setting a deadline to make it happen.
Then, your next goal will be how to turn 10k into 100k.
Know someone else that needs this, too? Then, please share!!
Back in the day, if you wanted a loan to pay off your car or credit cards, you’d go to a bank or a credit union, sit down with a loan officer, and wait for them to tell you yes or no as they “crunched the numbers.”
But now peer-to-peer (P2P) lending has come onto the market, offering loans to borrowers directly from individuals — and usually carrying more favorable terms for those without a great credit profile. Borrowers can access up to $50,000 (or more) from lenders, with fixed term repayment scheduled and reasonable interest rates. Investors can also become lenders on P2P platforms, earning interest collected on loans as a passive form of investment income.
Let’s break down some of the best peer-to-peer lending sites for both borrowers and investors, so you can determine which option is best for you.
What’s Ahead:
Overview of the best peer-to-peer lending sites
Best for those with high credit scores: Prosper
Best for crypto-backed loans: BlockFi
Best for young people: Upstart
Best for a payday loan alternative: SoLo Funds
Best for small businesses: FundingCircle
Best for first-time borrowers: Kiva
Prosper: Best for those with high credit scores
APR: 6.99% to 35.99%
Term: 2 to 5 years
Prosper is the OG peer-to-peer lender in the market. It was founded in 2005 as the very first peer-to-peer lending marketplace in the U.S. According to their website, they’ve coordinated over $22 billion in loans.
Borrowing with Prosper
If you’re a borrower, you can get personal loans up to $50,000 with a fixed rate and a fixed term from two to five years in length. Your monthly payment is fixed for the duration of the loan. There are no prepayment penalties, either, so if you can pay it off early, you won’t be penalized.
You can get an instant look at what your rate would be and, once approved, the money gets deposited directly into your bank account.
Investing with Prosper
As an investor, you have many options on loans to choose from. There are seven different “risk” categories that you can select from, each with their own estimated return and level of risk. Here’s a look at the risk levels and the estimated potential loss, according to Prosper:
AA – 0.00 – 1.99%
A – 2.00 – 3.99%
B – 4.00 – 5.99%
C – 6.00 – 8.99%
D – 9.00 – 11.99%
E – 12.00 – 14.99%
HR (High Risk) – ≥ 15.00%
As you can see, the lower the letter, the greater the risk of default, hence a higher estimated potential loss. With just a $25 minimum investment, you can spread your risk out across all seven categories to provide your portfolio some balance.
The borrowers that you’re lending to are also above U.S. averages regarding their FICO score and average annual income.
Learn more about Prosper or read our full review.
BlockFi: Best for crypto-backed loans
APR: 4.5% – 9.75%
Term: 12 months
BlockFi is a popular crypto lending platform that offers crypto-backed loans to borrowers and pays out interest to lenders. BlockFi offers instant loans and requires no credit checks for borrowers. All loans are collateralized, meaning borrowers will need to lock in their crypto to borrow against it.
Borrowing with BlockFi
If you’re a borrower, you can get a crypto loan for up to 50% of the value of your crypto, with rates ranging from 4.5% to 9.75% APR, depending on the amount of collateral. Payments are made monthly and are fixed for the duration of the loan.
Interest rates are determined by the amount of collateral deposited and the loan-to-value (LTV) of the overall loan. There is a 2% origination fee on all loans.
Loan rate – 9.75% (50% LTV)
Loan rate – 7.9% (35% LTV)
Loan rate – 4.5% (20% LTV)
Bitcoin (BTC), Ether (ETH), Paxos Gold (PAXG), or Litecoin (LTC) can be used as collateral for the loan, and can be liquidated if the LTV goes above the original LTV of the loan.
Investing with BlockFi
BlockFi offers interest accounts for users who deposit crypto. The funds are used for crypto lending, and interest is paid out in the native crypto deposited. Interest rates vary by cryptocurrency, and range from 0.10% APY up to 7.50% APY. Stablecoins (such as USDC) pay out the highest rates.
Crypto interest accounts are not available to U.S. investors, as BlockFi was sued by the SEC for violating securities laws.
Read our full review.
BlockFi Bankruptcy Notice -On November 10, 2022, BlockFi announced that it had to suspend withdrawals from its platform due to the FTX liquidity crisis. As a result, consumers should not be using the BlockFi platform. As of November 28, 2022, BlockFi officially declared bankruptcy.
Upstart: Best for young people
APR: 5.6% – 35.99%
Term: 3 or 5 years
Upstart is an innovative peer-to-peer lending company that was founded by three ex-Google employees. In addition to being a P2P lending platform, they’ve also created intuitive software for banks and financial institutions.
What’s unique about Upstart is the way they determine risk. Where most creditors will look at a lender’s FICO score, Upstart has created a system that uses AI/ML (artificial intelligence/machine learning) to assess the risk of a borrower. This has led to significantly lower loss rates than some of its peer companies. Combine that with an excellent TrustPilot rating, and this company is certainly making waves in the P2P marketplace.
Borrowing with Upstart
Borrowers can get loans from $1,000 up to $50,000 with rates as low as 5.6%. Terms are either three or five years, but there’s no prepayment penalty.
Using their AI/ML technology, Upstart looks at not only your FICO score and years of credit history, but also factors in your education, area of study, and job history before determining your creditworthiness. Their site claims that their borrowers save an estimated 43% compared to other credit card rates.
Investing with Upstart
Investing with Upstart is also pretty intuitive. Unlike other P2P platforms, you can set up a self-directed IRA using the investments from peer-to-peer lending. This is a unique feature that many investors should be attracted to.
Like other platforms, you can set up automated investing by choosing a specific strategy and automatically depositing funds.
Upstart claims to have tripled their growth in the last three years due heavily to their proprietary underwriting model, so it might be worth a shot to consider this option.
Learn more about Upstart or read our Upstart review.
SoLo Funds: Best for a payday loan alternative
APR: 0% (tipping optional)
Term: Up to 35 days
SoLo Funds is a peer-to-peer platform that functions as a short-term lender, similar to payday loans. With term lengths only lasting for up to 35 days, loans must be paid back in a narrow timeframe. But instead of charging fees, borrowers can leave an optional tip instead.
SoLo Funds is an affordable option for clients who are in a pinch and need an advance on payday, but there are hefty fees if loans are not paid back within 35 days. Users will need to pay a 10% penalty plus a third-party transaction fee if late.
Borrowing with SoLo Funds
Borrowers can take out loans up to $575 for a maximum of 35 days. Loans do not charge fees, but allow borrowers to select an optional tip amount to lenders.
Loan applications only take a few minutes, and while most loans post within a few days, some may be instantly approved, offering same-day funding with money transferred to borrowers within a few hours.
Loans must be paid back in full within 35 days, or there is a 10% penalty plus other transaction fees. There is no option to roll the loan over.
Investing with SoLo Funds
Lending is fairly straightforward, with a simple sign-up process and no pre-qualifications needed. Since the loans are smaller amounts (up to $575), there are no minimums required for lending.
SoLo Funds has a marketplace of loan requests from borrowers, with details specified on each. Each loan request shows the amount needed plus the tip given by the borrower for the loan. Each borrower also has a SoLo Score, on a scale from 40 to 99, with higher scores showing more “worthiness” for paying back a loan. Loans can go into default, and if needed, to collections through a third party. There is a risk of total loss with SoLo Funds investing, though the platform does offer insurance against loss for a fee.
Learn more about SoLo Funds.
FundingCircle: Best for small businesses
APR: 11.29% to 30.12%
Term: 6 months to 7 years
FundingCircle is a small business peer-to-peer platform. The company was founded with the goal of helping small business owners reach their dreams by providing them the funds necessary to grow.
So far, they’ve helped 130,000 small businesses across the world through investment funds by 71,000 investors across the globe. FundingCircle is different in that it focuses on more substantial dollar amounts for companies that are ready for massive growth. They also have an excellent TrustPilot rating.
Borrowing with FundingCircle
As a borrower, the minimum loan is $25,000 and can go all the way up to $500,000. Rates come as low as 5.99%, and terms can be anywhere from six months to seven years. There are no prepayment penalties, and you can use the funds however you deem necessary — as long as they are for your business.
You will pay an origination fee, but unlike other small business loans, funding is much quicker (you can be fully funded as quickly as 1 business day).
Investing with FundingCircle
As an investor, you’ll need to shell out a minimum of $25,000. If that didn’t knock you out of the race, then read on.
According to FundingCircle, you’ll “Invest in American small businesses (not start-ups) that have established operating history, cash flow, and a strategic plan for growth.” While the risk is still there, you’re funding established businesses looking for extra growth.
You can manage your investments and pick individual loans or set up an automated strategy, similar to Betterment, where you’ll set your investment criteria and get a portfolio designed for you.
Learn more about FundingCircle.
Kiva: Best for first-time borrowers
APR: 0%
Term: Up to 3 years
If you want to do some good in the world, you’ll find an entirely different experience in P2P with Kiva. Kiva is a San Francisco-based non-profit that helps people across the world fund their businesses at no interest. They were founded in 2005 with a “mission to connect people through lending to alleviate poverty.”
Borrowing with Kiva
If you’d like to borrow money to grow your business, you can get up to $15,000 with no interest. That’s right, no interest. After making an application and getting pre-qualified, you’ll have the option to invite friends and family to lend to you.
During that same time, you can take your loan public by making your loan visible to over 1.6 million people across the world. Like Kickstarter, you’ll tell a story about yourself and your business, and why you need the money. People can then contribute to your cause until your loan is 100% funded. After that, you can use the funds for business purposes and work on repaying your loan with terms up to three years.
Investing with Kiva
As a lender, you can choose to lend money to people in a variety of categories, including loans for single parents, people in conflict zones, or businesses that focus on food or health. Kiva has various filters set up so you can narrow down exactly the type of person and business you want to lend your money to. You can lend as little as $25, and remember, you won’t get anything but satisfaction in return — there’s no interest.
You can pick from a variety of loans and add them to your “basket,” then check out with one simple process. You’ll then receive payments over time, based on the repayment schedule chosen by the borrower and their ability to repay. The money will go right back into your Kiva account so you can use it again or withdraw it. There are risks to lending, of course, but Kiva claims to have a 96% repayment rate for their loans. Just remember, you’re not doing this as an investment, you’re doing it to help out another person.
Learn more about Kiva.
What is peer-to-peer lending?
As the name suggests, peer-to-peer lending involves private individuals making loans to other individuals. The system runs contrary to the traditional model of banks and credit unions providing financial services because it cuts out the middleman.
While peer-to-peer lending had a surge in users over the past decade, in the past few years, some P2P lending companies have shuttered their services, including StreetShares, Peerform, and LendingClub.
How does peer-to-peer lending work?
Peer-to-peer lending shares many similarities with traditional lending:
You fill out an application with your financial and personal information, including the loan’s size, tax returns, and government-issued identification.
The lender will review your application before posting it on the site for investors.
Investors get to play the part of a loan officer, reviewing a list of applications and deciding where they might want to contribute.
The platform will indicate how risky the loan is and the potential return on investment.
Funding takes anywhere from one day up to two weeks.
Is peer-to-peer lending safe?
No one would say that peer-to-peer lending is 100% safe. No form of investing is. Many of the best peer-to-peer lending sites vet borrowers and investors to mitigate risk. The review process helps eliminate untrustworthy candidates, so borrowers can receive their loan and investors can earn interest.
Read more: Should you invest in peer-to-peer loans?
Pros & cons of P2P lending for investors
Pros
An attractive alternative to more traditional investments — You can round out your portfolio that might exclusively include stocks, bonds, and mutual funds. Some platforms merge private and public equities, so you can make all your investments in one place.
Most lending platforms let you select multiple loans at once — The variation enables you to reduce your risk exposure while potentially earning higher yields than a CD or savings account.
Feel good about your contribution — With sites like Kiva, you know that your money is going toward a humanitarian purpose.
Cons
Risk of default — When you lend money to individuals, you risk them defaulting. Peer-to-peer lending sites don’t come with FDIC insurance like a CD or savings account.
P2P loans lack the liquidity of stocks or bonds — Most loans are for three to five years, so you would have to wait until then to withdraw money.
Inequality — Some platforms, such as Funding Circle, only give access to accredited investors, so not everyone has equal access to lending opportunities.
Pros & cons of P2P lending for borrowers
Pros
You can circumvent the traditional bureaucracy of brick-and-mortar banks — Instead of waiting in line and negotiating with a loan officer, you have access to a fast, online experience. Because online platforms don’t have to worry about physical overhead, many can give borrowers competitive interest rates.
P2P loans typically aren’t as strict as banks or credit unions — The lax approach makes it easier to secure a loan if you have fair or poor credit history.
Often no prepayment penalties — You don’t have to worry about prepayment penalties in many cases.
Cons
Borrowers face more hurdles if they have a low credit score — Interest rates can go as high as 36% for those with lower scores, while some platforms don’t offer financial services to anyone with a credit score below 630.
Possibly high fees — Some sites have origination fees of 6%.
Impersonal — If you want the old-fashioned face-to-face borrowing experience, peer-to-peer lending isn’t for you. You don’t have a chance to sit down with your lender and hash out terms.
Loan caps around $50,000 — If you need more money, you’ll likely have to go to a bank or credit union.
Summary
Peer-to-peer lending is a great option for borrowers with less-than-stellar credit who want access to capital with reasonable terms and rates. P2P lending is ideal for small businesses and individuals who are looking for a personal loan that does not require mountains of paperwork, and that is funded quickly (usually within a few days).
But not all P2P lending platforms operate the same, and some can charge high origination fees and interest rates. Others require high minimum loan amounts to borrow as well, making them less accessible to some borrowers.
Investors can earn decent returns with P2P lending, but there is also the risk of default and the mess of going through collections agencies occasionally. Finding a solid platform with detailed risk mitigation strategies (such as borrower scores), and insurance against default can help alleviate these concerns, but it may eat into your profits.
While peer-to-peer lending is not seeing the massive growth of a few years ago, it is still a solid option for borrowers and investors alike.
When I worked in management consulting, one of my responsibilities was to help my company figure out ways to make money while we slept. As a consulting business, our revenue stream came from selling the hours of the people who worked at our company. But to grow our margins, we knew we had to scale our time. This is where I first learned about passive income — the Holy Grail of the business world.
Now that I’m in my 30s, I think a lot about how to direct my active streams of income into passive income opportunities. Here are some things I’ve learned about active and passive income in my wealth-building journey.
What’s Ahead:
What Is Active Income?
Active income is earned by trading your time for money. Most people at the beginning of their careers are focused solely on earning active income to make a living.
What Is Passive Income?
Passive income is earned from income-producing assets. Someone who has passive income is not trading their time for money. Instead, the assets they own produce income without much involvement from the owner of the asset.
With the rise of financial influencers and the FIRE movement, finding ways to earn passive income has become a popular topic in the personal finance community.
Is Any Income Truly ‘Passive’?
The idea of earning truly passive income sounds amazing, right? But what’s often not discussed about passive income is that unless you inherit passive income-producing assets, creating passive income streams actually requires a substantial amount of active work.
Famous American entrepreneur Gary Vaynerchuk has gone as far as to say that truly passive income doesn’t exist outside of passive public market investing and rental income.
I tend to agree with Gary that the term ‘passive’ income is something of a misnomer. Creating passive income is never truly passive; there is no free lunch when it comes to financial mobility!
But thinking of income in active and passive terms might nonetheless have some benefits for those who are assessing their current financial status and crafting their wealth-building strategy. For that reason, I’ll break down the broad differences between active and passive income streams, as well as the most prominent ways to generate active or passive income.
Pros & Cons of Active Income
Pros
Allows you to develop a specific skill or expertise consistently
May provide social interaction and camaraderie associated with a traditional worksite
Cons
Trades time for money
Takes time away from doing other things
Cannot scale income potential beyond time constraints
Can be taxed at high rates
Pros & Cons of Passive Income
Pros
Generates money while sleeping, vacationing, etc.
Frees up more time for recreational activities
Subject to potential tax deductions
Scales income potential beyond time constraints
Does not require physical presence at a work site
Cons
Often requires you to create active income first
Usually harder to create than active income
Types of Active Income
Salary and Wages
The most basic and obvious form of active income is the salary that you earn from a typical job. A salary is a fixed amount received for working a regular schedule like 9 to 5, Monday through Friday. While a salary is a consistent form of active income, it can be taken away at a moment’s notice due to layoffs or downsizing. Most people earn their living from this type of income.
Bonuses and Commissions
Bonuses and commissions are other forms of active income. This type of income is not fixed and can vary dramatically based on the type of work performed. Many jobs can have a bonus or commission element added to a base salary, while other jobs can be 100% commission based.
Real estate agents, commercial real estate sales professionals, and other types of salespeople tend to fall into this income category. 100% commission-based jobs tend to have higher earning potential compared to salaried positions. However, they are also highly competitive, and their profitability is subject to ups and downs based on the economy, seasonality, and other factors.
Read more: How to Become a Real Estate Agent
Consulting and Freelancing
Freelancing and consulting fees are other types of active income that can either make up 100% of one’s income or serve as a side hustle. Those with valuable skills in high demand are often able to build side businesses, selling their time for specific short-term projects or long-term contracts. As of August 2021, there are 57 million freelancers working in the U.S., with 10 million more considering freelancing.
Looking ahead, more and more businesses are noting they’re willing to hire freelancers to support their mission, growth, and revenue.
Being a freelancer or consultant requires an entrepreneurial spirit, as this type of work can be very inconsistent and requires building a strong brand/reputation. Some of the most popular types of freelance work include graphic design, software development, copywriting, and photography.
Read more: 35+ Side Hustle Ideas
Equity Compensation
Equity compensation is a type of bonus that is given out at public or private companies to senior individuals or particularly valuable employees. Different types of equity compensation include straight shares, stock options, and Restricted Stock Units (RSUs).
It’s not uncommon for equity compensation to make up most of an individual’s income. For example, in 2020, 85% of an average CEO’s income was stock-related compensation.
Capital Gains
Buying and selling certain types of assets, like stocks and real estate, can generate capital gains if the asset’s sale price was higher than its original purchase price. For example, you might buy shares in a company while its stock price is low and then sell those shares later after the stock’s price has increased. The difference between the price you paid and the price you sold at is a capital gain.
Generating capital gains as a means of consistent income requires a significant amount of work, expertise, and risk-taking. Capital gains also have different tax treatments depending on how and when they are generated.
Read more: Claiming Capital Gains and Losses
Renting Out Property
Listing your property on sites like Airbnb can help you earn active income. While listing your property for rent may not require a significant investment of time and energy upfront, it’s not a set-it-and-forget-it income source.
Actively managing your listings, communicating with renters, and maintaining your property certainly requires active effort (unless you have a property manager).
Old Goods and Furniture Flipping
I’ve seen lots of people recently on TikTok and Instagram building side businesses by taking old or broken furniture, refurbishing it, and selling it for a profit. If you are handy and have an eye for design, this can be a great way of making active income given the low startup costs.
In addition to making money from selling the furniture, after you’ve built an audience you can sign brand partners and feature their products on your social media pages to generate even more income. Lastly, this type of business is a great way to help recycle old products that would have otherwise been thrown out.
Types of Passive Income
Interest and Dividends
Interest from your savings can be generated from high-yield savings accounts or by investing in CDs or bonds.
Dividends are paid to the shareholders of public companies. Not all companies pay dividends and the amount of dividends paid varies significantly. While earning dividends is passive income, choosing the right investments that generate dividends is a very active and time-consuming process.
In my experience, those looking to earn dividends can typically expect returns of 1–5%.
Rental Income
You can earn passive income from real estate by investing in rental properties, commercial real estate, public real estate investment trusts, or real estate crowdfunding platforms. Income-generating real estate can also provide landlords with tax benefits by deducting depreciation costs, property management expenses, insurance, and other expenses.
But there’s always an active element of real estate investing, no matter what type of real estate you invest in. This includes property management, dealing with tenants, managing relationships with lenders or investors, ensuring upkeep, or simply picking the right real estate projects to invest in. Some forms of real estate investing can become so time consuming that many personal finance experts question if real estate investing can be considered passive at all.
Read more: How to Invest in Real Estate
Peer-to-Peer (P2P) Lending
Peer-to-peer lending has attracted investors looking for an alternative to persistently low interest rates on savings accounts and bond yields. With P2P loans, investors make unsecured personal loans to others and can earn high returns.
While P2P lending has exploded in popularity (check out Lending Club and Prosper), these investments are very risky. The loans are often not secured against collateral, are not FDIC insured, and money invested in P2P lending can be difficult to access in times of economic stress.
Digital Product, Online Course, or Community Development
Creating digital products, courses, or online communities can be one of the best ways to earn passive income if you can package your skills and knowledge and sell it to a group of customers. In today’s digital age, the costs of creating a course, digital product, or community have never been lower, and all you really need is a computer and some creativity.
While there are lots of instances of everyday people earning millions on their digital products, don’t forget that getting to that point likely required a lot of work. Keeping these types of products relevant and up to date after launch also requires time, effort, and attention, not to mention having to market your product and keep up community engagement.
If you are interested in starting something like this up, platforms like Thinkific, Teachable, and Patreon are all options to explore.
YouTube/TikTok Ad Revenue
I became fascinated by the prospect of earning money on YouTube after coming across financial influencer Graham Stephan. Earning money on YouTube or Tik Tok generally comes down to building your channel’s audience and monetizing content through ads or affiliate marketing links. Once your presence meets a critical mass, every video you create has the potential to become an income-generating asset.
On the surface, making money on YouTube seems amazing, but again, it takes a lot of work and dedication to get there. For example, Graham has mentioned having to post videos at least three times a week for several years to get traction. And it often takes audiences of tens of thousands or hundreds of thousands of followers to earn any money.
But there’s lots of potential to earn sizable passive income from YouTube after you build an audience. The average YouTuber can make $3 to $5 per 1,000 video views and the top YouTubers can make millions annually.
Final Thoughts
Passive income can be a great way to earn more while working a regular 9 to 5, or it could fully replace your current stream(s) of active income entirely.
When it comes to building real wealth, however, the discussion around active vs. passive income is more nuanced.
According to a five-year study of 233 wealthy individuals, a common thread between them was that self-made millionaires generated income from multiple sources. 65% of them had three streams of income, 45% had four streams of income, and 29% had five or more streams of income.
These figures suggest that when it comes to building wealth, it’s not just a question of prioritizing passive vs. active income. Rather, it’s about generating multiple streams of income and scaling your time.
Personally, I have four streams of income:
The income I make from my 9 to 5
Investment capital gains
Dividends
Freelancing work
You can leave it to your own creativity and aspirations to find what constellation of passive and active income streams works best for you. But remember, whether you are looking to create passive or active income, there is no free lunch, and any source of income that ultimately becomes passive will likely start as a highly active pursuit.
In Best Low-Risk Investments for 2023, I provided a comprehensive list of low-risk investments with predictable returns. But it’s precisely because those returns are low-risk that they also provide relatively low returns.
In this article, we’re going to look at high-yield investments, many of which involve a higher degree of risk but are also likely to provide higher returns.
True enough, low-risk investments are the right investment solution for anyone who’s looking to preserve capital and still earn some income.
But if you’re more interested in the income side of an investment, accepting a bit of risk can produce significantly higher returns. And at the same time, these investments will generally be less risky than growth stocks and other high-risk/high-reward investments.
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Determine How Much Risk You’re Willing to Take On
The risk we’re talking about with these high-yield investments is the potential for you to lose money. As is true when investing in any asset, you need to begin by determining how much you’re willing to risk in the pursuit of higher returns.
Chasing “high-yield returns” will make you broke if you don’t have clear financial goals you’re working towards.
I’m going to present a large number of high-yield investments, each with its own degree of risk. The purpose is to help you evaluate the risk/reward potential of these investments when selecting the ones that will be right for you.
If you’re looking for investments that are completely safe, you should favor one or more of the highly liquid, low-yield vehicles covered in Best Low-Risk Investments for 2023. In this article, we’re going to be going for something a little bit different. As such, please note that this is not in any way a blanket recommendation of any particular investment.
Best High-Yield Investments for 2023
Table of Contents
Below is my list of the 18 best high-yield investments for 2023. They’re not ranked or listed in order of importance. That’s because each is a unique investment class that you will need to carefully evaluate for suitability within your own portfolio.
Be sure that any investment you do choose will be likely to provide the return you expect at an acceptable risk level for your own personal risk tolerance.
1. Treasury Inflation-Protected Securities (TIPS)
Let’s start with this one, if only because it’s on just about every list of high-yield investments, especially in the current environment of rising inflation. It may not actually be the best high-yield investment, but it does have its virtues and shouldn’t be overlooked.
Basically, TIPS are securities issued by the U.S. Treasury that are designed to accommodate inflation. They do pay regular interest, though it’s typically lower than the rate paid on ordinary Treasury securities of similar terms. The bonds are available with a minimum investment of $100, in terms of five, 10, and 30 years. And since they’re fully backed by the U.S. government, you are assured of receiving the full principal value if you hold a security until maturity.
But the real benefit—and the primary advantage—of these securities is the inflation principal additions. Each year, the Treasury will add an amount to the bond principal that’s commensurate with changes in the Consumer Price Index (CPI).
Fortunately, while the principal will be added when the CPI rises (as it nearly always does), none will be deducted if the index goes negative.
You can purchase TIPS through the U.S. Treasury’s investment portal, Treasury Direct. You can also hold the securities as well as redeem them on the same platform. There are no commissions or fees when buying securities.
On the downside, TIPS are purely a play on inflation since the base rates are fairly low. And while the principal additions will keep you even with inflation, you should know that they are taxable in the year received.
Still, TIPS are an excellent low-risk, high-yield investment during times of rising inflation—like now.
2. I Bonds
If you’re looking for a true low-risk, high-yield investment, look no further than Series I bonds. With the current surge in inflation, these bonds have become incredibly popular, though they are limited.
I bonds are currently paying 6.89%. They can be purchased electronically in denominations as little as $25. However, you are limited to purchasing no more than $10,000 in I bonds per calendar year. Since they are issued by the U.S. Treasury, they’re fully protected by the U.S. government. You can purchase them through the Treasury Department’s investment portal, TreasuryDirect.gov.
“The cash in my savings account is on fire,” groans Scott Lieberman, Founder of Touchdown Money. “Inflation has my money in flames, each month incinerating more and more. To defend against this, I purchased an I bond. When I decide to get my money back, the I bond will have been protected against inflation by being worth more than what I bought it for. I highly recommend getting yourself a super safe Series I bond with money you can stash away for at least one year.”
You may not be able to put your entire bond portfolio into Series I bonds. But just a small investment, at nearly 10%, can increase the overall return on your bond allocation.
3. Corporate Bonds
The average rate of return on a bank savings account is 0.33%. The average rate on a money market account is 0.09%, and 0.25% on a 12-month CD.
Now, there are some banks paying higher rates, but generally only in the 1%-plus range.
If you want higher returns on your fixed income portfolio, and you’re willing to accept a moderate level of risk, you can invest in corporate bonds. Not only do they pay higher rates than banks, but you can lock in those higher rates for many years.
For example, the average current yield on a AAA-rated corporate bond is 4.55%. Now that’s the rate for AAA bonds, which are the highest-rated securities. You can get even higher rates on bonds with lower ratings, which we will cover in the next section.
Corporate bonds sell in face amounts of $1,000, though the price may be higher or lower depending on where interest rates are. If you choose to buy individual corporate bonds, expect to buy them in lots of ten. That means you’ll likely need to invest $10,000 in a single issue. Brokers will typically charge a small per-bond fee on purchase and sale.
An alternative may be to take advantage of corporate bond funds. That will give you an opportunity to invest in a portfolio of bonds for as little as the price of one share of an ETF. And because they are ETFs, they can usually be bought and sold commission free.
You can typically purchase corporate bonds and bond funds through popular stock brokers, like Zacks Trade, TD Ameritrade.
Corporate Bond Risk
Be aware that the value of corporate bonds, particularly those with maturities greater than 10 years, can fall if interest rates rise. Conversely, the value of the bonds can rise if interest rates fall.
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4. High-Yield Bonds
In the previous section we talked about how interest rates on corporate bonds vary based on each bond issue’s rating. A AAA bond, being the safest, has the lowest yield. But a riskier bond, such as one rated BBB, will provide a higher rate of return.
If you’re looking to earn higher interest than you can with investment-grade corporate bonds, you can get those returns with so-called high-yield bonds. Because they have a lower rating, they pay higher interest, sometimes much higher.
The average yield on high-yield bonds is 8.29%. But that’s just an average. The yield on a bond rated B will be higher than one rated BB.
You should also be aware that, in addition to potential market value declines due to rising interest rates, high-yield bonds are more likely to default than investment-grade bonds. That’s why they pay higher interest rates. (They used to call these bonds “junk bonds,” but that kind of description is a marketing disaster.) Because of those twin risks, junk bonds should occupy only a small corner of your fixed-income portfolio.
High Yield Bond Risk
In a rapidly rising interest rate environment, high-yield bonds are more likely to default.
High-yield bonds can be purchased under similar terms and in the same places where you can trade corporate bonds. There are also ETFs that specialize in high-yield bonds and will be a better choice for most investors, since they will include diversification across many different bond issues.
5. Municipal Bonds
Just as corporations and the U.S. Treasury issue bonds, so do state and local governments. These are referred to as municipal bonds. They work much like other bond types, particularly corporates. They can be purchased in similar denominations through online brokers.
The main advantage enjoyed by municipal bonds is their tax-exempt status for federal income tax purposes. And if you purchase a municipal bond issued by your home state, or a municipality within that state, the interest will also be tax-exempt for state income tax purposes.
That makes municipal bonds an excellent source of tax-exempt income in a nonretirement account. (Because retirement accounts are tax-sheltered, it makes little sense to include municipal bonds in those accounts.)
Municipal bond rates are currently hovering just above 3% for AAA-rated bonds. And while that’s an impressive return by itself, it masks an even higher yield.
Because of their tax-exempt status, the effective yield on municipal bonds will be higher than the note rate. For example, if your combined federal and state marginal income tax rates are 25%, the effective yield on a municipal bond paying 3% will be 4%. That gives an effective rate comparable with AAA-rated corporate bonds.
Municipal bonds, like other bonds, are subject to market value fluctuations due to interest rate changes. And while it’s rare, there have been occasional defaults on these bonds.
Like corporate bonds, municipal bonds carry ratings that affect the interest rates they pay. You can investigate bond ratings through sources like Standard & Poor’s, Moody’s, and Fitch.
Fund
Symbol
Type
Current Yield
5 Average Annual Return
Vanguard Inflation-Protected Securities Fund
VIPSX
TIPS
0.06%
3.02%
SPDR® Portfolio Interm Term Corp Bond ETF
SPIB
Corporate
4.38%
1.44%
iShares Interest Rate Hedged High Yield Bond ETF
HYGH
High-Yield
5.19%
2.02%
Invesco VRDO Tax-Free ETF (PVI)
PVI
Municipal
0.53%
0.56%
6. Longer Term Certificates of Deposit (CDs)
This is another investment that falls under the low risk/relatively high return classification. As interest rates have risen in recent months, rates have crept up on certificates of deposit. Unlike just one year ago, CDs now merit consideration.
But the key is to invest in certificates with longer terms.
“Another lower-risk option is to consider a Certificate of Deposit (CD),” advises Lance C. Steiner, CFP at Buckingham Advisors. “Banks, credit unions, and many other financial institutions offer CDs with maturities ranging from 6 months to 60 months. Currently, a 6-month CD may pay between 0.75% and 1.25% where a 24-month CD may pay between 2.20% and 3.00%. We suggest considering a short-term ladder since interest rates are expected to continue rising.” (Stated interest rates for the high-yield savings and CDs were obtained at bankrate.com.)
Most banks offer certificates of deposit with terms as long as five years. Those typically have the highest yields.
But the longer term does involve at least a moderate level of risk. If you invest in a CD for five years that’s currently paying 3%, the risk is that interest rates will continue rising. If they do, you’ll miss out on the higher returns available on newer certificates. But the risk is still low overall since the bank guarantees to repay 100% of your principle upon certificate maturity.
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7. Peer-to-Peer (P2P) Lending
Do you know how banks borrow from you—at 1% interest—then loan the same money to your neighbor at rates sometimes as high as 20%? It’s quite a racket, and a profitable one at that.
But do you also know that you have the same opportunity as a bank? It’s an investing process known as peer-to-peer lending, or P2P for short.
P2P lending essentially eliminates the bank. As an investor, you’ll provide the funds for borrowers on a P2P platform. Most of these loans will be in the form of personal loans for a variety of purposes. But some can also be business loans, medical loans, and for other more specific purposes.
As an investor/lender, you get to keep more of the interest rate return on those loans. You can invest easily through online P2P platforms.
One popular example is Prosper. They offer primarily personal loans in amounts ranging between $2,000 and $40,000. You can invest in small slivers of these loans, referred to as “notes.” Notes can be purchased for as little as $25.
That small denomination will make it possible to diversify your investment across many different loans. You can even choose the loans you will invest in based on borrower credit scores, income, loan terms, and purposes.
Prosper, which has managed $20 billion in P2P loans since 2005, claims a historical average return of 5.7%. That’s a high rate of return on what is essentially a fixed-income investment. But that’s because there exists the possibility of loss due to borrower default.
However, you can minimize the likelihood of default by carefully choosing borrower loan quality. That means focusing on borrowers with higher credit scores, incomes, and more conservative loan purposes (like debt consolidation).
8. Real Estate Investment Trusts (REITs)
REITs are an excellent way to participate in real estate investment, and the return it provides, without large amounts of capital or the need to manage properties. They’re publicly traded, closed-end investment funds that can be bought and sold on major stock exchanges. They invest primarily in commercial real estate, like office buildings, retail space, and large apartment complexes.
If you’re planning to invest in a REIT, you should be aware that there are three different types.
“Equity REITs purchase commercial, industrial, or residential real estate properties,” reports Robert R. Johnson, PhD, CFA, CAIA, Professor of Finance, Heider College of Business, Creighton University and co-author of several books, including The Tools and Techniques Of Investment Planning, Strategic Value Investing and Investment Banking for Dummies. “Income is derived primarily from the rental on the properties, as well as from the sale of properties that have increased in value. Mortgage REITs invest in property mortgages. The income is primarily from the interest they earn on the mortgage loans. Hybrid REITs invest both directly in property and in mortgages on properties.”
Johnson also cautions:
“Investors should understand that equity REITs are more like stocks and mortgage REITs are more like bonds. Hybrid REITs are like a mix of stocks and bonds.”
Mortgage REITs, in particular, are an excellent way to earn steady dividend income without being closely tied to the stock market.
Examples of specific REITs are listed in the table below (source: Kiplinger):
REIT
Equity or Mortgage
Property Type
Dividend Yield
12 Month Return
Rexford Industrial Realty
REXR
Industrial warehouse space
2.02%
2.21%
Sun Communities
SUI
Manufactured housing, RVs, resorts, marinas
2.19%
-14.71%
American Tower
AMT
Multi-tenant cell towers
2.13%
-9.00%
Prologis
PLD
Industrial real estate
2.49%
-0.77%
Camden Property Trust
CPT
Apartment complexes
2.77%
-7.74%
Alexandria Real Estate Equities
ARE
Research Properties
3.14%
-23.72%
Digital Realty Trust
DLR
Data centers
3.83%
-17.72%
9. Real Estate Crowdfunding
If you prefer direct investment in a property of your choice, rather than a portfolio, you can invest in real estate crowdfunding. You invest your money, but management of the property will be handled by professionals. With real estate crowdfunding, you can pick out individual properties, or invest in nonpublic REITs that invest in very specific portfolios.
One of the best examples of real estate crowdfunding is Fundrise. That’s because you can invest with as little as $500 or create a customized portfolio with no more than $1,000. Not only does Fundrise charge low fees, but they also have multiple investment options. You can start small in managed investments, and eventually trade up to investing in individual deals.
One thing to be aware of with real estate crowdfunding is that many require accredited investor status. That means being high income, high net worth, or both. If you are an accredited investor, you’ll have many more choices in the real estate crowdfunding space.
If you are not an accredited investor, that doesn’t mean you’ll be prevented from investing in this asset class. Part of the reason why Fundrise is so popular is that they don’t require accredited investor status. There are other real estate crowdfunding platforms that do the same.
Just be careful if you want to invest in real estate through real estate crowdfunding platforms. You will be expected to tie your money up for several years, and early redemption is often not possible. And like most investments, there is the possibility of losing some or all your investment principal.
Low minimum investment – $10
Diversified real estate portfolio
Portfolio Transparency
10. Physical Real Estate
We’ve talked about investing in real estate through REITs and real estate crowdfunding. But you can also invest directly in physical property, including residential property or even commercial.
Owning real estate outright means you have complete control over the investment. And since real estate is a large-dollar investment, the potential returns are also large.
For starters, average annual returns on real estate are impressive. They’re even comparable to stocks. Residential real estate has generated average returns of 10.6%, while commercial property has returned an average of 9.5%.
Next, real estate has the potential to generate income from two directions, from rental income and capital gains. But because of high property values in many markets around the country, it will be difficult to purchase real estate that will produce a positive cash flow, at least in the first few years.
Generally speaking, capital gains are where the richest returns come from. Property purchased today could double or even triple in 20 years, creating a huge windfall. And this will be a long-term capital gain, to get the benefit of a lower tax bite.
Finally, there’s the leverage factor. You can typically purchase an investment property with a 20% down payment. That means you can purchase a $500,000 property with $100,000 out-of-pocket.
By calculating your capital gains on your upfront investment, the returns are truly staggering. If the $500,000 property doubles to $1 million in 20 years, the $500,000 profit generated will produce a 500% gain on your $100,000 investment.
On the negative side, real estate is certainly a very long-term investment. It also comes with high transaction fees, often as high as 10% of the sale price. And not only will it require a large down payment up front, but also substantial investment of time managing the property.
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11. High Dividend Stocks
“The best high-yield investment is dividend stocks,” declares Harry Turner, Founder at The Sovereign Investor. “While there is no guaranteed return with stocks, over the long term stocks have outperformed other investments such as bonds and real estate. Among stocks, dividend-paying stocks have outperformed non-dividend paying stocks by more than 2 percentage points per year on average over the last century. In addition, dividend stocks tend to be less volatile than non-dividend paying stocks, meaning they are less likely to lose value in downturns.”
You can certainly invest in individual stocks that pay high dividends. But a less risky way to do it, and one that will avoid individual stock selection, is to invest through a fund.
One of the most popular is the ProShares S&P 500 Dividend Aristocrat ETF (NOBL). It has provided a return of 1.67% in the 12 months ending May 31, and an average of 12.33% per year since the fund began in October 2013. The fund currently has a 1.92% dividend yield.
The so-called Dividend Aristocrats are popular because they represent 60+ S&P 500 companies, with a history of increasing their dividends for at least the past 25 years.
“Dividend Stocks are an excellent way to earn some quality yield on your investments while simultaneously keeping inflation at bay,” advises Lyle Solomon, Principal Attorney at Oak View Law Group, one of the largest law firms in America. “Dividends are usually paid out by well-established and successful companies that no longer need to reinvest all of the profits back into the business.”
It gets better. “These companies and their stocks are safer to invest in owing to their stature, large customer base, and hold over the markets,” adds Solomon. “The best part about dividend stocks is that many of these companies increase dividends year on year.”
The table below shows some popular dividend-paying stocks. Each is a so-called “Dividend Aristocrat”, which means it’s part of the S&P 500 and has increased its dividend in each of at least the past 25 years.
Company
Symbol
Dividend
Dividend Yield
AbbVie
ABBV
$5.64
3.80%
Armcor PLC
AMCR
$0.48
3.81%
Chevron
CVX
$5.68
3.94%
ExxonMobil
XOM
$3.52
4.04%
IBM
IBM
$6.60
5.15%
Realty Income Corp
O
$2.97
4.16%
Walgreen Boots Alliance
WBA
$1.92
4.97%
12. Preferred Stocks
Preferred stocks are a very specific type of dividend stock. Just like common stock, preferred stock represents an interest in a publicly traded company. They’re often thought of as something of a hybrid between stocks and bonds because they contain elements of both.
Though common stocks can pay dividends, they don’t always. Preferred stocks on the other hand, always pay dividends. Those dividends can be either a fixed amount or based on a variable dividend formula. For example, a company can base the dividend payout on a recognized index, like the LIBOR (London Inter-Bank Offered Rate). The percentage of dividend payout will then change as the index rate does.
Preferred stocks have two major advantages over common stock. First, as “preferred” securities, they have a priority on dividend payments. A company is required to pay their preferred shareholders dividends ahead of common stockholders. Second, preferred stocks have higher dividend yields than common stocks in the same company.
You can purchase preferred stock through online brokers, some of which are listed under “Growth Stocks” below.
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Preferred Stock Caveats
The disadvantage of preferred stocks is that they don’t entitle the holder to vote in corporate elections. But some preferred stocks offer a conversion option. You can exchange your preferred shares for a specific number of common stock shares in the company. Since the conversion will likely be exercised when the price of the common shares takes a big jump, there’s the potential for large capital gains—in addition to the higher dividend.
Be aware that preferred stocks can also be callable. That means the company can authorize the repurchase of the stock at its discretion. Most will likely do that at a time when interest rates are falling, and they no longer want to pay a higher dividend on the preferred stock.
Preferred stock may also have a maturity date, which is typically 30–40 years after its original issuance. The company will typically redeem the shares at the original issue price, eliminating the possibility of capital gains.
Not all companies issue preferred stock. If you choose this investment, be sure it’s with a company that’s well-established and has strong financials. You should also pay close attention to the details of the issuance, including and especially any callability provisions, dividend formulas, and maturity dates.
13. Growth Stocks
This sector is likely the highest risk investment on this list. But it also may be the one with the highest yield, at least over the long term. That’s why we’re including it on this list.
Based on the S&P 500 index, stocks have returned an average of 10% per year for the past 50 years. But it is important to realize that’s only an average. The market may rise 40% one year, then fall 20% the next. To be successful with this investment, you must be committed for the long haul, up to and including several decades.
And because of the potential wide swings, growth stocks are not recommended for funds that will be needed within the next few years. In general, growth stocks work best for retirement plans. That’s where they’ll have the necessary decades to build and compound.
Since most of the return on growth stocks is from capital gains, you’ll get the benefit of lower long-term capital gains tax rates, at least with securities held in a taxable account. (The better news is capital gains on investments held in retirement accounts are tax-deferred until retirement.)
You can choose to invest in individual stocks, but that’s a fairly high-maintenance undertaking. A better way may be to simply invest in ETFs tied to popular indexes. For example, ETFs based on the S&P 500 are very popular among investors.
You can purchase growth stocks and growth stock ETFs commission free with brokers like M1 Finance, Zacks Trade, Wealthsimple.
14. Annuities
Annuities are something like creating your own private pension. It’s an investment contract you take with an insurance company, in which you invest a certain amount of money in exchange for a specific income stream. They can be an excellent source of high yields because the return is locked in by the contract.
Annuities come in many different varieties. Two major classifications are immediate and deferred annuities. As the name implies, immediate annuities begin paying an income stream shortly after the contract begins.
Deferred annuities work something like retirement plans. You may deposit a fixed amount of money with the insurance company upfront or make regular installments. In either case, income payments will begin at a specified point in the future.
With deferred annuities, the income earned within the plan is tax-deferred and paid upon withdrawal. But unlike retirement accounts, annuity contributions are not tax-deductible. Investment returns can either be fixed-rate or variable-rate, depending on the specific annuity setup.
While annuities are an excellent idea and concept, the wide variety of plans as well as the many insurance companies and agents offering them, make them a potential minefield. For example, many annuities are riddled with high fees and are subject to limited withdrawal options.
Because they contain so many moving parts, any annuity contracts you plan to enter into should be carefully reviewed. Pay close attention to all the details, including the small ones. It is, after all, a contract, and therefore legally binding. For that reason, you may want to have a potential annuity reviewed by an attorney before finalizing the deal.
15. Alternative Investments
Alternative investments cover a lot of territory. Examples include precious metals, commodities, private equity, art and collectibles, and digital assets. These fall more in the category of high risk/potential high reward, and you should proceed very carefully and with only the smallest slice of your portfolio.
To simplify the process of selecting alternative assets, you can invest through platforms such as Yieldstreet. With a single cash investment, you can invest in multiple alternatives.
“Investors can purchase real estate directly on Yieldstreet, through fractionalized investments in single deals,” offers Milind Mehere, Founder & Chief Executive Officer at Yieldstreet. “Investors can access private equity and private credit at high minimums by investing in a private market fund (think Blackstone or KKR, for instance). On Yieldstreet, they can have access to third-party funds at a fraction of the previously required minimums. Yieldstreet also offers venture capital (fractionalized) exposure directly. Buying a piece of blue-chip art can be expensive, and prohibitive for most investors, which is why Yieldstreet offers fractionalized assets to diversified art portfolios.”
Yieldstreet also provides access to digital asset investments, with the benefit of allocating to established professional funds, such as Pantera or Osprey Fund. The platform does not currently offer commodities but plans to do so in the future.
Access to wide array of alternative asset classes
Access to ultra-wealthy investments
Can invest for income or growth
Learn More Now
Alternative investments largely require thinking out-of-the-box. Some of the best investment opportunities are also the most unusual.
“The price of meat continues to rise, while agriculture remains a recession-proof investment as consumer demand for food is largely inelastic,” reports Chris Rawley, CEO of Harvest Returns, a platform for investing in private agriculture companies. “Consequently, investors are seeing solid returns from high-yield, grass-fed cattle notes.”
16. Interest Bearing Crypto Accounts
Though the primary appeal of investing in cryptocurrency has been the meteoric rises in price, now that the trend seems to be in reverse, the better play may be in interest-bearing crypto accounts. A select group of crypto exchanges pays high interest on your crypto balance.
One example is Gemini. Not only do they provide an opportunity to buy, sell, and store more than 100 cryptocurrencies—plus non-fungible tokens (NFTs)—but they are currently paying 8.05% APY on your crypto balance through Gemini Earn.
In another variation of being able to earn money on crypto, Crypto.com pays rewards of up to 14.5% on crypto held on the platform. That’s the maximum rate, as rewards vary by crypto. For example, rewards on Bitcoin and Ethereum are paid at 6%, while stablecoins can earn 8.5%.
It’s important to be aware that when investing in cryptocurrency, you will not enjoy the benefit of FDIC insurance. That means you can lose money on your investment. But that’s why crypto exchanges pay such high rates of return, whether it’s in the form of interest or rewards.
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17. Crypto Staking
Another way to play cryptocurrency is a process known as crypto staking. This is where the crypto exchange pays you a certain percentage as compensation or rewards for monitoring a specific cryptocurrency. This is not like crypto mining, which brings crypto into existence. Instead, you’ll participate in writing that particular blockchain and monitoring its security.
“Crypto staking is a concept wherein you can buy and lock a cryptocurrency in a protocol, and you will earn rewards for the amount and time you have locked the cryptocurrency,” reports Oak View Law Group’s Lyle Solomon.
“The big downside to staking crypto is the value of cryptocurrencies, in general, is extremely volatile, and the value of your staked crypto may reduce drastically,” Solomon continues, “However, you can stake stable currencies like USDC, which have their value pegged to the U.S. dollar, and would imply you earn staked rewards without a massive decrease in the value of your investment.”
Much like earning interest and rewards on crypto, staking takes place on crypto exchanges. Two exchanges that feature staking include Coinbase and Kraken. These are two of the largest crypto exchanges in the industry, and they provide a wide range of crypto opportunities, in addition to staking.
Invest in Startup Businesses and Companies
Have you ever heard the term “angel investor”? That’s a private investor, usually, a high net worth individual, who provides capital to small businesses, often startups. That capital is in the form of equity. The angel investor invests money in a small business, becomes a part owner of the company, and is entitled to a share of the company’s earnings.
In most cases, the angel investor acts as a silent partner. That means he or she receives dividend distributions on the equity invested but doesn’t actually get involved in the management of the company.
It’s a potentially lucrative investment opportunity because small businesses have a way of becoming big businesses. As they grow, both your equity and your income from the business also grow. And if the business ever goes public, you could be looking at a life-changing windfall!
Easy Ways to Invest in Startup Businesses
Mainvest is a simple, easy way to invest in small businesses. It’s an online investment platform where you can get access to returns as high as 25%, with an investment of just $100. Mainvest offers vetted businesses (the acceptance rate is just 5% of business that apply) for you to invest in.
It collects revenue, which will be paid to you quarterly. And because the minimum required investment is so small, you can invest in several small businesses at the same time. One of the big advantages with Mainvest is that you are not required to be an accredited investor.
Still another opportunity is through Fundrise Innovation Fund. I’ve already covered how Fundrise is an excellent real estate crowdfunding platform. But through their recently launched Innovaton Fund, you’ll have opportunity to invest in high-growth private technology companies. As a fund, you’ll invest in a portfolio of late-stage tech companies, as well as some public equities.
The purpose of the fund is to provide high growth, and the fund is currently offering shares with a net asset value of $10. These are long-term investments, so you should expect to remain invested for at least five years. But you may receive dividends in the meantime.
Like Mainvest, the Fundrise Innovation Fund does not require you to be an accredited investor.
Low minimum investment – $10
Diversified real estate portfolio
Portfolio Transparency
Final Thoughts on High Yield Investing
Notice that I’ve included a mix of investments based on a combination of risk and return. The greater the risk associated with the investment, the higher the stated or expected return will be.
It’s important when choosing any of these investments that you thoroughly assess the risk involved with each, and not focus primarily on return. These are not 100% safe investments, like short-term CDs, short-term Treasury securities, savings accounts, or bank money market accounts.
Because there is risk associated with each, most are not suitable as short-term investments. They make most sense for long-term investment accounts, particularly retirement accounts.
For example, growth stocks—and most stocks, for that matter—should generally be in a retirement account. While there will be years when you will suffer losses in your position, you’ll have enough years to offset those losses between now and retirement.
Also, if you don’t understand any of the above investments, it will be best to avoid making them. And for more complicated investments, like annuities, you should consult with a professional to evaluate the suitability and all the provisions it contains.
FAQ’s on High Yield Investment Options
What investment has the highest yield?
The investment with the highest yield will vary depending on a number of factors, including current market conditions and the amount of risk an investor is willing to take on. Generally speaking, investments with the potential for high yields also come with a higher level of risk, so it’s important for investors to carefully consider their options and choose investments that align with their financial goals and risk tolerance.
Some examples of high-yield investments include:
1. Stocks: Some stocks may offer high dividend yields, which is the annual dividend payment a company makes to its shareholders, expressed as a percentage of the stock’s current market price.
2. Real estate: Investing in real estate, either directly by purchasing property or indirectly through a real estate investment trust (REIT), can potentially generate high returns in the form of rental income and appreciation of the property value.
3. High-yield bonds: High-yield bonds, also known as junk bonds, are bonds that are issued by companies with lower credit ratings and thus offer higher yields to compensate for the added risk.
4. Private lending: Investing in private loans, such as through peer-to-peer lending platforms, can potentially offer high yields, but it also carries a higher level of risk.
5. Commodities: Investing in commodities, such as precious metals or oil, can potentially generate high returns if the prices of those commodities rise. However, the prices of commodities can also be volatile and subject to market fluctuations.
It’s important to note that these are just examples and not recommendations. As with any investment, it’s crucial to carefully research and consider all the potential risks and rewards before making a decision.
Where can I invest my money to get high returns?
There are a number of places you can invest your money to get high returns. One option is to invest in stocks, which typically offer higher returns than other investment options. Another option is to invest in bonds, which are considered a relatively safe investment option.
You could also invest in real estate, which has the potential to provide high returns if done correctly. Finally, you could also invest in commodities, such as gold or silver, which can be a risky investment but can also offer high returns.
What investments can I make a 10% return?
It’s difficult to predict exactly what investments will generate a 10% return, as investment returns can vary depending on a number of factors, including market conditions and the performance of the specific investment. Some investments, such as stocks and real estate, have the potential to generate returns in excess of 10%, but they also come with a higher level of risk. It’s important to remember that past performance is not necessarily indicative of future results, and that all investments carry some degree of risk
By Peter Anderson6 Comments – The content of this website often contains affiliate links and I may be compensated if you buy through those links (at no cost to you!). Learn more about how we make money. Last edited November 8, 2012.
Lending Club launched a couple of years back and along with a few other companies helped to create a whole new banking paradigm, one where people lend their money to other people and get better returns on their money than if they had saved with a traditional bank. In turn, the people who are borrowing end up getting a lower rate than they may have at a traditional bank, and are able to save some money in the process.
While the road hasn’t been without it’s speed bumps, Lending Club has weathered the storm, and in my opinion has become the premier peer to peer lending site around. While others are starting to catch up to them in some respects, like the folks at Prosper, I still think they’re the gold standard when it comes to P2P lending sites.
I’ve been pretty happy with the returns that I’ve seen with my Lending Club account. When I first started using it I was expecting that I would put a small amount of money into it, and that I would probably see some defaults here and there. I wasn’t ever expecting to put anything more than a bit of fun money in there, and I didn’t think the returns would be as good as they’ve been. I thought they might be a bit better (after defaults) than what I’m seeing at my high yield savings account. The reality has been much brighter. I’m currently making over 10.5% on my invested money after just over 2 years, and I’ve yet to see a single default. At the same time I get to have the good feeling of helping others to get loans at lower rates than they would get at a traditional bank or via a credit card. It’s a great way to consolidate higher interest debt. So how are my returns right now, and what strategy am I using?
Check out my original Lending Club review
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Lending Club Returns Above 10.5%
So here’s a quick look at the returns I’ve been seeing lately after including more high risk loans over the past 8 months or so.
Net Annualized Return of 10.53%: Up from 10.17% in April, and 9.67% before that. That puts me in the 53rd percentile, in other words my return is higher than 53% and lower than 47% of all investors. My goal is to be doing better than 1/2 of Lending Club users, and it looks like I’ve now reached that goal. Of course I’ll still be trying to improve that number!
Number of defaults remains at zero: Despite all odds I’m still showing zero defaults on my account, despite having given out over 100 loans so far. I’m actually surprised I haven’t had at least one or two.
Ten loans have been paid off early: Eight were A grade loans, and the other two were C grade loans. Looks like grade A loans, while they’re more likely to be paid back, may also be more likely to pay of early – reducing returns.
My account balance still going up: I currently have $2,554.74 in my account, with another $600+ ready to invest. I’m starting to become more comfortable with using Lending Club, and as such adding more most months.
I’m still diversified by investing across a large number of loans: I’ve got over 100, with no more than $25 in each loan. That way if I do have defaults, while my return may go down, my risk will be minimized. Lending Club noted earlier this month, that 100% of their investors who have invested 800 notes or more had positive returns. Not too shabby, not everyone in the stock market can say that!
So it looks like my strategy I laid out a few months ago of adding more risky C, D and F grade loans is paying off so far.
Riskier Loans Aren’t Always Bad Bets
As I’ve mentioned in the past about 8 months ago I modified my investing strategy a bit based off of the plan laid out by Matt at steadfastfinances.com. He started a Lending Club investing club where he would hand pick loans every week or two, based off of his own investing criteria. Part of his strategy was investing in lower grade loans to borrowers who he thought would be good risks. Most of the loans he was looking at and choosing were higher risk C or D grade loans, for people with lower credit scores, but who had a good high paying professions, solid job histories and job security, and good payment histories. Using his strategy he was seeing in excess of 14% returns at one point.
Using his strategy I’ve been able to get my returns from somewhere in the 8-9% range to up over 10.5% in about 8 months. I’d like to see if I can get my net annualized return up even closer to 11-12% by continuing this strategy.
Here’s where my NAR stands now, slightly above average. I hope to move up a couple of columns there:
My Strategy For Investing With Lending Club
My strategy I used in the past for Lending Club, and the strategy I’ll still be using to some degree:
Less than $10,000: I believe I’ll still be sticking with mostly loans below $10,000. Lower amounts mean higher likelihood of payback of the loan.
Zero delinquencies: Again, I may fudge slightly on this one, but I still want it to be very few or zero delinquencies.
Debt to income ratio below 20-25%: I like to invest in loans where the borrowers have a lower DTI ratio, and preferably have higher incomes. I’ll try to keep this as is.
Borrower answers to investor questions: I like to ask questions from potential borrowers. You can tell a lot about someone, and about how they’ll do repaying the loan, by how they answer the questions. Unfortunately Lending Club stopped allowing investors to ask questions in part I believe because of privacy and liability concerns. You can now only ask from a pre-set list of questions. More than one investor – including Matt who I mentioned above, have quit Lending Club because of this change.
So that’s what I’m doing with my Lending Club portfolio right now, and how I’m investing.
Not ready to invest, but looking to consolidate debt or pay off a high interest credit card? You might want to consider borrowing from Lending Club. Check out my post on borrowing from Lending Club.
Are you currently investing in Lending Club? How are your returns looking? Tell us in the comments!
This post may contain affiliate links, which helps us to continue providing relevant content and we receive a small commission at no cost to you. As an Amazon Associate, I earn from qualifying purchases. Please read the full disclosure here.
If you’re looking to make a big difference with your money, then read on.
You might be thinking that it’s unlikely for anyone to generate $100k in revenue on their first go.
But we have good news: You don’t need to – people can earn more than 10x the amount they had initially invested into them!
This is possible because there are so many ways to make money today that cost less than what most would consider “big-ticket” investments like a car or a house.
Today, you will learn from this article provides tips on how to turn $10k into more money in 2022.
The goal is to learn how to make your money work for you.
We have included 20 different ways to make quick and easy money.
The methods included are varied and include things like investing in stocks, starting a business, and finding work that pays well. This guide will help you get started on making extra cash quickly and easily!
What can I do with my 10K to make money?
There are many ways to make money with your 10K. You can use it to invest, save, or spend.
You can also use it to purchase items that will generate income such as rental properties, stocks, and businesses.
The most important thing is to find something that you enjoy and that will help you grow financially. Making passive income is even better!
How can I grow 10K to 100K?
The goal is to find the method that works best for you and makes the most money. That is who you will grow 10K to 100K this year.
There are many options available below to help you grow your money, so choose what will work best for you.
You don’t need expensive equipment or special skills to start making your money multiply. In fact, learning how to invest $100 to make $1000 a day is a common question answered here by Money Bliss.
You can start with simple methods and add on as you get better at it.
What are some fast ways to invest 10k to make 100k?
While it is difficult to make a living from one job, the ability to work multiple jobs has been shown in many studies as an effective way of generating income.
More and more people today, are focusing on ways to build passive income to grow their wealth.
Setting a goal of how to turn $10k into $100k is a great way to multiply your money.
Option #1 – Stock market investing
The goal of investing in the stock market is to earn profits by buying and selling stocks at a higher price than what was paid for them.
There are several ways to invest in the stock market, but the simplest way is to buy and sell individual stocks. You can also purchase mutual funds, which are collections of different stocks that are managed by an investment company or ETFs. Other investors prefer to look at dividend stocks.
Investments in the stock market can be risky, but if you do it correctly, you could see significant returns over time.
Related Learning: How To Invest In Stocks For Beginners: Investing Made Easy
Option #2 – Invest with Retirement Accounts
Investing in retirement accounts can help you turn 10K into 100K over time. By investing in a 401k, IRA, or other retirement accounts, you will have access to growing assets that can help you reach your financial goals.
When you invest money in a retirement account, the funds are held by the company and grow over time. This means that even if the stock market experiences tough times, your 401k or IRA will still be growing steadily. This is important because it allows you to delay taking major financial risks and focus on long-term planning instead.
By investing early in your career, you can build up a sizable nest egg that will provide security for yourself and your loved ones when you retire.
Option #3 – Invest in Rental Property
Investing in rental property can be a great way to make money. Rental properties often have high yields (the percentage of income returned to investors), and there’s never been a better time to invest in this type of property.
Rental properties are an attractive investment because they tend to have stable yields, which means you can count on making a certain amount of money every year.
In addition, rental properties are usually less risky than other types of investments, so you can feel confident about your returns even if the market goes down.
There are many ways to buy and sell rental properties, so you can find one that’s right for your financial situation. And since rents always go up (to some degree), investing in rental property is a guaranteed way to grow your money over time.
Option # 5 – Flip Stuff To Make Money
Flipping is the process of buying and selling assets in order to generate profits. It can be done through stocks, bonds, real estate, furniture, art, sports equipment, or any other type of material item.
There are a few ways to flip stuff for money. One way is to buy assets and then sell them at a higher price later.
For example, you might buy stock in a company and then sell it two months later for a higher price. This technique is called “swing trading.” Others do the buying and selling within the same day for “day trading.”
Another way to flip stuff is to wait until the asset has reached its peak value and then sell it. For example, you might buy property in downtown Chicago for $100,000 and wait six months until the market reaches its peak value of $200,000 before selling it for $200,000 minus commission.
On a smaller scale, many people flip items found at Flea Markets and easily make $100k with a few transactions. If that sounds like you, then take a free flippers class!
Option # 6 – Start An Online Business
Starting an online business is a great way to make money. There are a variety of ways to do this, and the sky is the limit!
Some people start their own businesses to create something they’re passionate about, and others start businesses in order to make extra money. Whatever your reasons for starting an online business, there are plenty of ways to do it fast.
In fact, learning how to make money online for beginners is a hot topic!
Option #7 – Start a Side Hustle
Not willing to start a full-fledged online business yet? Then, look at a side hustle. This is an extra job or business you do on the side to make money.
It is flexible, easy to start, and doesn’t require much time commitment. You can work part-time or full-time, as long as you’re able to devote enough time each week to it. And since it’s your own gig, you have complete control over its success!
There are plenty of resources available online that will help guide you through the process (including this blog post on best gig economy jobs). Just remember: don’t give up on your side hustle until it becomes profitable and meaningful to you – because once it does, that’ll be worth double the effort!
Option #8 – Invest In Cryptocurrency
Cryptocurrencies are digital tokens that use cryptography to secure their transactions and control the creation of new units. Cryptocurrencies are decentralized, meaning they are not subject to government or financial institution control.
Many people view cryptocurrencies as a way to make money online. Bitcoin, for example, has increased in value by over 1,000% since its inception in 2009! While there is a lot of speculation involved with cryptocurrencies, if you’re patient, you can find opportunities to invest in them as well.
There are two main ways you can invest in cryptocurrencies: buying them on an exchange and mining them. Buying cryptocurrencies on an exchange allows you to quickly and easily trade them for other currencies or assets. Mining coins involves trying to solve complex mathematical problems that reward participants with cryptocurrency tokens.
While it’s important to do your own research before investing in any type of cryptocurrency, these fast ways could help you double your money within just a few short weeks!
Option #9 – Peer-to-peer lending (P2P)
P2P lending is a type of online lending where individuals lend money to other individuals, usually without any collateral.
P2P lending has become increasingly popular in recent years because it offers borrowers and lenders an alternative to traditional banking products. Borrowers can borrow money from multiple lenders at once, which gives them more options and access to financing. Lenders can earn interest on their loans while also taking advantage of the high demand for P2P lending products.
Because P2P lending is a new product category, there are still some risks associated with it. For example, borrowers may not be able to repay their loans, and lenders may not be able to collect on the loans they have lent out. However, the growth of P2P lending indicates that there is room for this type of financing in the marketplaces.
Peer-to-Peer Lending Options:
Option #10 – Invest in Yourself with Education
The fastest way to turn $10,000 into $100,000 is to invest in yourself. This is very often overlooked, but one of the best returns on investment that you can have.
Consider taking courses to improve your skillset or investing in real estate or stocks.
My favorite online courses to improve your income:
With hard work and dedication, you can make your money work for you and achieve your financial goals.
Option #11 – Day Trade (or Swing Trade) in the Stock Market
Investing in the stock market is a way to make money by buying and selling shares of companies.
There are two main ways to make money through investing: buying and holding (also known as long-term investing), and active trading (also known as short-term investing).
Many people in this popular investing course choose to become active investors by day trading or swing trading for income. In fact, many people have made the $1000 in a day club.
Option #12 – Trading Stock Options
Option traders can make money by predicting which direction prices will move and then trading on those predictions.
Trading options is risky because it’s possible for prices to change after you’ve bought or sold them – so your profits (or losses) may depend on how well you guess what’ll happen.
But if you do manage to make money by trading options, it can be very lucrative – especially over short periods of time (days or weeks).
First, before trading stock options, you must learn how to trade the underlying stocks first. Learn how to trade options with this VIP investing course.
Option #13 – Invest in an Initial Public Offering (IPO)
Wouldn’t you love to invest in Amazon (AMZN) or Google (GOOGL) when they first went public??
If you invested $500 into AMZN, it would be worth $855,505 (as of August 2022) – source)
If you invested $500 into GOOGL, it would be worth $27,502 (as of August 2022) – source)
An IPO is a type of stock market transaction in which a company sells shares to the public. An IPO offers businesses the opportunity to expand their reach and raise money quickly.
IPOs are popular because they provide investors with access to new companies at an early stage. As such, IPOs can be a great winner or a great loser of your capital. Thus, do your research.
Option #14 – Flip Websites
Flipping websites is a quick and easy way to make money. All you need is the right software and some knowledge of how the internet works.
Flipping websites means buying a website, fixing up the code, improving the SEO, and selling it to another owner or business. This process can be done quickly and easily with the help of some simple tools. By flipping websites, you can earn a profit while also increasing your web traffic.
Flipping websites is a great way to make money on the side and supplement your income. It’s also an excellent way to learn more about online marketing and build your own business skills.
Option #15 – Start Affiliate Marketing to Turn 10k into 100k
Affiliate marketing is a great way to turn 10,000 into 100,000 by earning money through promoting other people’s products. This is also known as an influencer. And you don’t have to carry inventory yourself!
There are a few different ways to get started with affiliate marketing, and the most important thing is to find an affiliate program that aligns with your goals and interests.
Once you’ve registered with an affiliate program, it’s time to start promoting! There are a variety of tools and resources available online that can help you build an effective affiliate campaign through social media or blog traffic.
Option #16 – Invest in REITs with Real Estate Market
Real estate investment trusts (REITs) are a type of investment that allows you to invest in real estate without having to own the property. This is done by investing in a portfolio of properties that are owned and managed by the REIT.
REITs offer investors several advantages over other types of real estate investments. These advantages include:
Low risk – REITs are typically less risky than other real estate investments, such as buying and holding single family homes or properties.
Lower fees – Unlike buying and holding individual properties, REITs pay relatively low management fees, which means your money is more likely to be returned to you quickly.
Liquidity – As long as there is demand for REIT shares, the prices will generally continue to rise, giving you an opportunity to make significant profits over time.
Investing in REITS can be a great way to diversify your real estate portfolio and achieve higher returns while avoiding some of the risks associated with other types of real estate investments.
My favorite REIT platforms are:
Option #17 – Invest in penny stocks
Penny stocks are a type of investment that is usually considered to be risky but can offer high returns if the right investments are made.
Penny stocks are small companies that trade on the stock market for under $2-10 per share. Because these companies are relatively new and often have little financial stability, penny stocks can be volatile – meaning they can rise or fall in price quickly while low or high volume.
Because penny stocks are so risky, it’s important to do your investigation before investing in them. However, if you make the right choices and invest in carefully chosen penny stocks, you could see high returns over time.
Option #18 – Make Money With Retail Arbitrage or Flipping
Retail arbitrage is the practice of buying products in one market and selling them in another market to earn a profit. Many do this with dropshipping.
There are a few fast ways to get started with retail arbitrage. The first is by using online tools like eBay, Facebook Marketplace or Amazon’s Selling Manager. These platforms make it easy to find specific items that you want to buy and sell at a profit.
All in all, you are looking for low price items and selling them for a profit.
By taking advantage of flipping methods like these, you can quickly increase your income without having to spend too much time researching each opportunity. Learn more withthis FREE webinar.
Option #19 – Start A Service-Based Business
Starting a service-based business can be a great way to make money by finding clients willing to pay for your services. There are many different types of service businesses, and each offers its own unique opportunities and challenges.
Service businesses can be profitable in a number of different ways. You may be able to charge high prices for your services or offer them at a discount in order to attract customers.
There are several advantages to starting a service-based business.
First, you have control over your own schedule and work environment.
Second, you can set your own hours and earn a flexible income.
Finally, service businesses tend to be more recession-proof than other types of businesses because they don’t rely as much on consumer spending habits.
Option #20 – Buy a business
Buying a business is a great way to increase your wealth and expand your empire. There are many different types of businesses available for purchase, so it’s important to choose the right one for you.
There are two main reasons why buying a business can be beneficial. First, buying a business gives you access to valuable assets that you couldn’t otherwise own – like cash flow, customer lists, and intellectual property. Second, buying a business can help you build a dynasty by passing on the company name and legacy to future generations.
There are many different factors to consider when purchasing a business, so it’s important to consult with an experienced advisor and do your due diligence.
How to Turn 10K Into 100K FAQs
Obviously, you probably have a lot of questions when trying to decide on which investment opportunities are best for you. While affiliate programs may work for some, you may want to use your stock market knowledge. Maybe even a dog walking business?
Ultimately, you have $10k in investment capital to start with, now you have to make some decisions.
What are the best ways to turn $10k into $100k?
A lot of people have been asking themselves this question lately and wondering what they could do with their money in order to make a big difference in their lives and achieve financial freedom.
In addition, you probably have questions before you make this a reality.
How Can I Get Rich With 10K?
One of the best ways to get rich is to start with a small sum of money and grow it over time by being consistent in your actions.
Learn the best ways to invest 10k.
It’s not about getting lucky, but rather developing habits that will help you achieve your goals. With hard work and dedication, anyone can become wealthy over time.
How to Turn 10k into 100k in 1 year?
There are a few key things you need to do in order to turn 10k into 100k in 1 year.
You need to look for a business to start that has a lot of potential for growth and profit. Don’t forget, that you must be willing to work hard and put in the time and effort required to make your business successful.
You need to be passionate (and adamant) about turning 10000 dollars into 100000. If you are wanting a 900% return on investment, then you must be willing to put in the effort to make that happen.
How to turn 10k into 100k in a month?
For most people, it will take more than just one month to turn 10k into 100k.
Regardless of the path you choose, it will take time to get the education and experience needed to achieve such a high return.
The best options for faster success include: starting an online business, becoming an active stock market trader, or investing in real estate. There are many options available, but it is important to do your research and find what works best for you.
How Can I Turn $10k into $100k Passively?
The key right here is … passive income!
You want to find ways to make money passively – also known as making money while you sleep.
The most common way is through passive income streams, which include investments, real estate, and online businesses. Whichever route you decide to take, the key is to be patient and let the money grow over time.
Many people want to make 10k a month – passive income is even better!
How Do I Convert 10K Into 100K With Stocks?
There are a few different ways to convert 10,000 into 100,000 with stocks.
Buy and hold: This is the simplest option and can be effective for those who are looking to invest for the long term. By buying stock in a company and holding on to it, you will eventually see your investment grow over time.
Day trading: This involves buying and selling stocks quickly in order to make money based on the movements of the market. While this can be very exciting, it is also risky because you could lose all of your money if the market goes down.
Investing in Options: Options allow you to buy or sell a security at a set price within a certain period of time. This type of investing is often considered conservative because you don’t have to worry about losing your investment if the market goes down – you only risk losing money if the option doesn’t expire or hits its expiration date without being exercised (sold).
Dividend stocks reinvestment: When companies pay out cash dividends each quarter, many investors choose to reinvest that money back into more shares of stock – which increases their total ownership stake in the company over time.
Trade shares for assets: Some people choose to trade their shares of stock for other types of assets, such as real estate or precious metals. This allows them to diversify their portfolio and increase their chances of making a profit.
What are some risks associated with these methods?
As always, there are risks with any method of looking for a high rate of return. You must do your due diligence first to make sure the investment is worthwhile and not a scam.
When looking to make a high return on investment, it is important to be aware of the risks involved. Sometimes, these investments are not as secure as low-return options and can result in losing the original investment. It is, therefore, crucial to do your homework before investing in anything.
What are some other things to keep in mind when trying to double your money?
There are a few other things to keep in mind when trying to find a way to double $10k quickly.
Though it can be difficult to turn 10k into 100k, there are ways to make this happen. For example, by investing in stocks or real estate, one can see an increase in their original investment. Additionally, starting a business can also lead to a doubling of one’s money. However, it is important to keep in mind the risks associated with these ventures.
When you are trying to double your money, make sure you are looking at smart investments, saving wisely, and increasing your income. Additionally, don’t forget about enjoying life while you’re working towards this goal!
Be cautious about get-rich-quick schemes
There are a lot of get-rich-quick schemes out there that promise you can make money quickly by following a certain plan or investing in a certain product. While these schemes may seem promising at first, they’re often nothing more than scams.
The reality is that most get-rich-quick schemes don’t work the way they’re supposed to. In fact, many of them actually lead to losses for the people who try them. This is because most of these schemes involve high-risk investments or unproven methods.
So if you’re thinking about trying one of these schemes, be sure to do your research first. You might be able to find a better way to make money without risking everything you have.
What Skills Will Help You Make 100k Fast
The goal of this article is to help you turn $10k into $100K by the end of this year. No need for a fancy MBA or years’ worth of experience, just some simple skills that will help you.
More than likely, you will have to invest in an online course or even a few books to help you along your journey. For instance, I purchased a blogging course to jumpstart my entrepreneurship. Also, I dived straight into an investing course to further my stock market knowledge.
When you are growing your liquid net worth, you are looking somewhere to have your money make more money. The strategy you choose will be different than the person reading this same post. Buy, you have to show patience and know that you will reach your target based on your timeline.
There is a lot of content available to help you along your path.
As we discussed above, there are many different ways to make 10K to 100K this year, so choose the one that works best for you and gets results!
Know someone else that needs this, too? Then, please share!!
By Peter Anderson8 Comments – The content of this website often contains affiliate links and I may be compensated if you buy through those links (at no cost to you!). Learn more about how we make money. Last edited September 26, 2011.
Lending Club has been around for a few years now, and while they and other P2P lending sites got off to a rocky start, I think they’ve started to hit their stride. Lending Club recently announced on their 4th anniversary that they have now originated over $300 million in total loans and paid out over 22 million in interest to investors. So they’re no longer the little engine that could, they’re now becoming the next big thing! Still, there are still those who don’t believe in P2P lending, mostly because they don’t completely understand it.
When I started lending with Lending Club I wasn’t sure what kind of returns I would see, and as such I was pretty cautious with who I lent money to. I was only investing with Grade A and B borrowers to begin with. Since then others have convinced me that investing with some lower grade borrowers is a sound idea, and I’ve seen my returns grow from somewhere in the high 8% range (not too bad) to the point where I’m now pushing 11%.
All I know is 11% net annualized returns are a lot higher than I’d be getting in a high yield savings account. The longer I’ve been using Lending Club, the more comfortable I am with the idea, and the more money I’ll consider putting in.
To start off at the beginning, check out my original review of lending club below:
Check out my original Lending Club review
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Lending Club Returns Above 10.76%
So how are my Lending Club investments currently doing? Here’s a snapshot of my account from earlier today showing that my returns are pushing 11% now.
Net Annualized Return of 10.76%: Up from 10.53% in June, and 10.13% before that. That puts me in the 55th percentile. My returns are higher than 55% and lower than 45% of all investors. So that means I’ve already reached my goal of doing better than 1/2 of other investors. Now to make it better than 75% of other investors!
Number of defaults remains at zero: Despite all odds I’m still showing zero defaults on my account, despite having given out over 100 loans so far. I’m actually surprised I haven’t had at least one or two. I do currently have one loan that is late, however. The funny thing is that once again the late loan is one of the Grade B loans, not one of the lower grade ones. Go figure.
Fourteen loans have been paid off early: Eight were A grade loans, and the other three were C grade loans, two were grade B and one grade E. Looks like grade A loans, while they’re more likely to be paid back, may also be more likely to pay of early – reducing returns.
My account balance still going up: I currently have $2,578.98 in my account, with another $800+ ready to invest. I’ll be the first to admit that the last couple of months I haven’t added many loans as I’ve been distracted by other things. I’ll probably be trying to invest that extra $800 soon though.
I’m still diversified by investing across a large number of loans: I’ve got 106 loans, with no more than $25 in each loan. That way if I do have defaults, while my return may go down, my risk will be minimized. Lending Club noted earlier this month, that 100% of their investors who have invested 800 notes or more had positive returns. Not too shabby, not everyone in the stock market can say that!
So it looks like my strategy I laid out a few months ago of adding more risky C, D and F grade loans is paying off so far.
Risky Loans Still Defying The Odds With Zero Defaults
I mentioned a while back that I was changing my Lending Club investing strategy and starting to invest in more higher risk lower grade loans. The rationale was that you can still find people that are relatively good risks, but who have bad credit. Most of these are going to be loans from people who have high incomes and steady employement, but for one reason or another have had a hiccup in their credit causing them to be lower grade.
I’ve invested in a bunch of these Grade C-E loans over the past year, and since doing so my returns have steadily climbed. I would have expected to see a few defaults in there, but so far I’ve been investing in the riskier loans for about a year now, and none of them have defaulted yet. Would you think some of them will still default despite my early success? Possibly. But I’m hoping my gamble on those with steady jobs and high incomes will mean I wont’ see many defaults.
Here’s where my NAR stands now, getting better every month. Now standing at 10.76%. I’m hoping I can break through that 11% threshold next month!
Lending Club Strategy
Here’s the basic strategy I’ve been using with Lending Club over the past couple of years.
Less than $10,000: I believe I’ll still be sticking with mostly loans below $10,000. Lower amounts mean higher likelihood of payback of the loan.
Zero delinquencies: Again, I may fudge slightly on this one, but I still want it to be very few or zero delinquencies.
Debt to income ratio below 20-25%: I like to invest in loans where the borrowers have a lower DTI ratio, and preferably have higher incomes. I’ll try to keep this as is.
Borrower answers to investor questions: Because of privacy and liability concerns you can no longer ask whatever question you want from borrowers, but only ask from a pre-set list of questions. It’s still good enough for me I think, although I’d prefer being able to ask specific questions.
So that’s what I’m doing with my Lending Club portfolio right now, and how I’m investing.
Not ready to invest, but looking to consolidate debt or pay off a high interest credit card? You might want to consider borrowing from Lending Club. Check out my post on borrowing from Lending Club.
Are you currently investing in Lending Club? How are your returns looking? Tell us in the comments!
By Peter Anderson10 Comments – The content of this website often contains affiliate links and I may be compensated if you buy through those links (at no cost to you!). Learn more about how we make money. Last edited August 24, 2011.
We’ve been talking about Lending Club on this site for just over two years now. In that time I’ve been converted from a skeptic of the whole P2P lending genre to becoming a big proponent of it. I now think that it can be a great thing for both lenders and borrowers under the right circumstances.
Lending Club recently announced that they have now originated over $325 million in total loans and paid out over 22 million in interest to investors. They now have over 50,000 individual investors and 32,000 borrowers on the platform.
They’ve gone from the new kid on the financial block to becoming the next big thing for people looking to get a more stable investment with good returns, or to find a lower rate on a consumer loan. They are now, dare I say it, mainstream.
Check out my original Lending Club review
My Lending Club Investments Continue To Perform Well
My Lending Club investments have been showing good returns, with my net annualized return currently checking in at a nice 10.76%. That number has been slowly going up as I continually add new loans, mixing in some higher risk loans with my low risk loans.
Net Annualized Return of 10.76%: Up from 10.53% in June, and 10.13% before that. That puts me in the 55th percentile. My returns are higher than 55% and lower than 45% of all investors. So that means I’ve already reached my goal of doing better than 1/2 of other investors. Now to make it better than 75% of other investors!
Number of defaults remains at zero: Despite all odds I’m still showing zero defaults on my account, despite having given out over 100 loans so far. I’m actually surprised I haven’t had at least one or two. I do currently have one loan that is late, however. The funny thing is that once again the late loan is one of the Grade B loans, not one of the lower grade ones. Go figure.
Fifteen loans have been paid off early: Eight were A grade loans, and the other three were C grade loans, three were grade B and one grade E. Looks like grade A loans, while they’re more likely to be paid back, may also be more likely to pay off early – reducing returns.
My account balance still going up: I currently have $2,585.47 in my account, with $730+ of that ready to invest. I’ll be the first to admit that the last couple of months I haven’t added many loans as I’ve been distracted by other things. I’ll probably be trying to invest that money sitting in the account soon as I find loans that I like.
I’m still diversified by investing across a large number of loans: I’ve got 111 loans, with no more than $25 in each loan. That way if I do have defaults, while my return may go down, my risk will be minimized. Lending Club noted earlier this month, that 100% of their investors who have invested 800 notes or more had positive returns. Not too shabby, not everyone in the stock market can say that!
Stock Market Fluctuations: Could It Lead To More People Trying P-2-P Lending?
The stock market has been doing some wild gyrations over the past month or two, and because of that a lot of people are questioning whether they should still be in the markets. Even if they want to stay the course (as we are), they’re still looking for some alternative investments now that will be a little less volatile but still show a good return.
I think that Lending Club, Prosper and other P2P lending institutions may benefit from the stock market being so up and down. Lending Club and Prosper have both had a bunch of good press lately, and seeing as how investing in Lending Club has been proven to be a relatively stable performer for those who have a diversified portfolio, I think a lot of people will be drawn to the relative security of a Lending Club portfolio.
Does that mean investing in Lending Club is a sure thing? Of course not. But at least in my own situation I’ve seen that a properly diversified portfolio with handpicked loans will show good returns. I’ve yet to see a down month, or a single default! What stock market investor wouldn’t give his or her right leg to see that kind of stability!
Lending Club Gets $25 Million In New Funding
Lending Club continues to have good news after good news. After reaching their 4th anniversary earlier this year they have now announced that they’ve secured another round of funding, and that their post funding valuation is now at $275 million, up from 80 million last year. From WSJ.com
Lending Club, the peer-to-peer online loans marketplace, said it has raised a new $25 million round of funding that pegs the start-up at a $275 million post-money valuation, up from $80 million last year.
The financing comes as Lending Club has gathered momentum. The start-up, which matches lenders and borrowers online, has seen the loans it has originated grow 125% on a compound annualized rate while revenue has risen 180% year over year and is expected to reach $15 million to $20 million this year, according to Laplanche. Lending Club now has 50,000 individual investors and 32,000 borrowers on its platform, he said. Overall, Lending Club has surpassed $325 million in loan originations and its average loan size is $10,000, he added.
I think investors in Lending Club see the company’s potential, and are jumping in on the ground floor with this company as it continues to grow.
Lending Club T-Shirt Giveaway!
A few weeks ago Lending Club was nice enough to send me a swag pack after I won a contest on Twitter. Included in the pack was a nice messenger bag (which I use every day now), some pens and a nice Lending Club T-shirt similar to the one you see to the right.
Problem is, the t-shirt doesn’t fit me as it’s a size large, and as a tall guy at 6’4″, I wear a slightly larger size. My loss is your gain as this week I’m giving away my Lending Club T-shirt!
For your chance to win all you have to do is:
Leave a comment on this post telling me whether you think Lending Club is now mainstream, and whether more people will be using them now that the stock market has started showing such volatility. Feel free to also tell us how it’s performing for you if you’re already signed up!
For a second chance at winning, sign up for Lending Club through this post, and then leave a comment telling me that you’ve done so!
I’ll be choosing a winner of the contest on Friday, August 19th at 12pm via Random.org. That’s it!
UPDATE: Imad is the winner! Congrats!
Do you think that Lending Club has arrived as a legitimate investment option? Do you think it will see an influx of dollars as people look for more stable investment options? Tell us your thoughts in the comments!
When my husband and I were first married we were on an extremely tight budget. We relocated from Ohio for him to go to a very expensive graduate school, and I had no job!
Eventually, I got a job as a career counselor and student affairs administrator at San Diego State University.
His tuition was about 1/3 of my gross salary. Fortunately, we had some savings to help with expenses.
This story explains how we managed to invest on a small salary, and ultimately grew our initial investment over 6 times.
The Investing Crucible
My first introduction to the 403(b) was through my employer. I made the decision to contribute the maximum allowed by law, even though I knew we couldn’t live on the rest of my salary.
I’d be lying if I said we didn’t miss the $800 per month retirement plan contribution, because we did.
And we couldn’t have done this had we not saved up a bit during the previous years to help tide us over.
Was this crazy or not?
My thinking was, I would dip into savings in order to meet our living expenses if necessary, and we would live as cheaply as possible.
We didn’t borrow for my husband’s tuition and we paid our credit card off in full every month. During those first two years of graduate school, before my husband started working part time, times were tough. (Side note; one year we were on a game show and won enough to pay for one year’s tuition)
Our entertainment consisted of pot luck dinners with our friends or happy hour at the local Tio Leo’s where one drink entitle you to a nice buffet of chicken wings, tacos, and snacks. That was our dinner. We rented movies for $1.00 at the video store (yes, back in the day, you had to go to a store and rent a movie).
There were plenty of months where we dipped into our savings because we transferred $900 per month from my salary into our TIAA-CREF 403(b) and my gross salary was only about $3,000 per month. As my salary increased, I increased the account contribution to the maximum allowed by law.
The Investing Payoff
My employer did not contribute to this account at all.
Since the early 1990’s until today, the account increased 6.38 times. Every dollar I contributed 20+ years ago is now worth $6.38.
After I left this job, I never contributed to this account again. As a matter of fact, I didn’t even change the asset allocation of this account which was 25% invested in a TIAA fixed return annuity and 75% in the CREF stock fund.
Notice the 14.4% return from January to September, 2013. That was lower than the return we would have earned had the asset allocation held more stock investments and less fixed. But for us, I like to keep a percent of our overall portfolio diversified into cash and bonds to smooth out the volatility, even if that hampers long term returns.
The Power of Investing Now
During the previous 20 years since I left this job, there have been times when the value of this account went down and other periods when it went up. As John Bogle recommends, I didn’t pay much attention to the value, because I had no intention of withdrawing the funds.
Had we not made the decision to struggle financially during those years, there is no way we would have the available assets we have today.
Personal Disclosure
To be perfectly honest, moving from Ohio to Southern California was a bit of a culture shock. As a “down to earth” girl, not overly obsessed with fancy cars etc., the So. Cal. environment was a shock. Everywhere you turned there was another luxury car. Appearances were very important!
This didn’t make me feel bad, while I drove my Chevy Cavalier, but it surprised me.
I knew I wanted to become wealthy eventually , and I understood that saving and investing was the way to get there. Well, saving, investing, and of course building up our earnings.
I enjoyed our lifestyle and realized how lucky we were to live in beautiful Southern California. I’d be lying if I said there weren’t times when I wished we had more disposable income:). But overall, I appreciate our former financial choices as I see the great payoff today.
That said, I don’t think we could have met our financial goals as easily had we not decided to move to a more affordable place to live while raising our daughter.
The Real Secret to Wealth
This simple chart shows the power of leaving your money in the markets and letting it compound. This is the value of 1 penny doubling every day for a month. On day 31, the doubling of the prior day’s funds equals over $10 million.
Although you won’t find a 100 percent return anywhere legitimate, notice how it took quite awhile for the true benefit of the compounded growth to be realized.
We continued to contribute the maximum to our workplace retirement accounts, IRA’s, Roth IRA’s, and 529 College Savings account. Nothing deterred us from our aggressive saving and investing. As our income grew, our lifestyle improved, but never went “over the top”. Not until recently have we experienced the explosion of growth from our compounded investing.
All of our older accounts show the same type of growth as that initial TIAA-CREF workplace retirement account. Although, I wouldn’t have believed it at the time, the longer you leave your money in the markets to compound, the greater the growth.
Time in the markets, even more than investment returns, is the greatest predictor of wealth from investing. In fact, Albert Einstein once commented that compound interest is one of the greatest wonders of the world.
Investing Rules for Wealth Building
Time in the markets is the most precious commodity when it comes to investing. By leaving money in the markets to grow, the initial account contributions can multiply. Keep the money invested for a shorter period and there’s less time for the sum to compound. Even if you choose to expand into other investing, like p2p lending with lending club or with M1 Finance make sure you have time on your side when you are doing it.
Decide whether you are willing to make a tradeoff. You can’t have everything now and later. Ask yourself if you’re willing to sacrifice a bit now for the likelihood of having more later.
This is a guest post from Barbara Friedberg, MBA, MS, is a portfolio manager, former university finance instructor and publisher of the investing website, Barbara Friedberg Personal Finance.com.