A ‘good ROI’ is usually between 7% and 8%, but the more profits you earn, the better, right? Fortunately, there are ways to earn much higher ROIs than even the best high-yield savings accounts can offer.
If you’re looking for an investment returns of 10% or higher, you must be willing to take on some risk. Though some investments may seem somewhat out-of-the-box, they can bring in a significant return!
10 Best Investments with High Returns
While there’s no guarantee, these investments could help you make 10% or more on your money:
- Real Estate
- Index Funds
- Peer-to-Peer Lending
- Junk Bonds
- Precious Metals
1. Real Estate
Real estate is a popular way to earn a 10% ROI or higher, and there are many ways to do it. This investment is naturally a hedge against inflation, and it can offer a steady cash flow in certain situations.
The typical way to invest in real estate is to purchase a residential or commercial property to manage and rent to tenants. You can also purchase property and flip it for a profit. Acting as a landlord is the most physically demanding way to invest to earn an ROI of 10% or higher, but it can be the most rewarding.
To invest in real estate, you’ll need adequate capital and the ability to finance the remainder of the real estate’s cost.
You can invest in real estate yourself or with a partner, typical for commercial properties like apartment complexes.
- Hedge against inflation
- Can pay steady cash flow
- Many options including residential and commercial
- It’s labor-intensive work to manage real estate
- You need a lot of capital to start
If you don’t want to own real estate yourself, you can invest in crowdfunding and enjoy the benefits of a high ROI in real estate without the pressure of owning it yourself.
When you invest in crowdfunding, you invest in real estate with many other investors. Some platforms allow minimum investments as low as $25 per investment, diversifying your capital as much as possible and increasing your chances of earning a return on investment of 10% or higher.
The only downside with crowdfunding is you typically must invest for five years or longer, and the investments are somewhat illiquid. Some offer the option to sell early, but you’ll pay a penalty.
- Easier to invest in real estate than own it yourself
- You can diversify your portfolio easily
- The more risk you take, the higher rate of return you earn
- Long holding period
- Dependent on the real estate market performance
Stocks are an investment in a company. You can invest in any company publicly traded on the market. If you work with a brokerage firm that allows fractional shares, you can buy less than one company share with your money.
For example, you could buy a fraction of a share if you have $50 to invest but want to buy a more expensive type of stock like Amazon, which is currently $103.53. When investing in stocks, you can invest for the short or long-term, which affects your capital gains taxes the most.
Long-Term vs Short-Term
According to the IRS, long-term investments are assets held for over a year. So, for example, if you purchase Amazon stock on January 1, 2021, and still own it on March 1, 2022, you can sell it and pay only long-term capital gains, which can be 0%, 15%, or 20%.
However, if you purchase and sell stocks in the same year, you’ll pay short-term capital gains taxes, which are taxed at your normal rate.
If you sold the Amazon stock you purchased on January 1, 2021, on April 1, 2021, for example, you’d add your profits to your income and pay your ordinary tax rate, which is likely higher than your long-term capital gains tax rate.
- You can invest in companies you believe in
- Diversify investments across many industries and stock types
- Investors profit when companies do well
- Some stocks may be out of your financial reach
- The stock market can be volatile
3. Index Funds
Index funds and ETFs are baskets of multiple securities, making diversifying your investment across many stocks easier. However, while you can diversify yourself, knowing which stocks to buy and sell to offset the risk of a total loss takes a lot of work.
Index funds are diversified for you and typically try to mimic the returns of an entire index, such as the S&P 500. They can help diversify your portfolio, but you should keep them for at least five years for the highest chances of returns greater than 10%. Since stocks make up index funds, you risk a loss or lower ROI if you sell them early, and five years is the ‘sweet spot’ for most funds.
- Automatically diversified for you
- Passive investment that doesn’t require any work from you
- Tries to mimic an index’s return
- You should hold onto the investments for the long-term
- There may be a minimum investment requirement
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REITs or real estate investment trusts offer an opportunity to invest in real estate without owning and managing the properties yourself. When you invest in an REIT, you invest in a real estate investment company that owns the real estate properties, usually commercial properties.
Most REITs invest in cash-flow properties that pay investors monthly from rent collected and capital gains when the REIT sells the property.
Publicly traded REITs trade on the major stock market. You can buy or sell them anytime. You purchase REITs through your brokerage; some have minimum investment requirements or required investment periods.
REITs must pay 90% of their profits to shareholders, which means they must share rent or interest collected and any other passive income earned on the property. When the REIT sells the property, it must distribute the capital gains to its shareholders.
You’ll pay income taxes on the income earned and should consult your tax advisor to see how the earnings affect your tax liabilities.
Since most REITs are long-term investments, they can pay a higher ROI thanks to the steady dividend income and long-term capital appreciation.
- Offers the chance to invest in real estate without the burden of managing it
- Low barrier to entry
- Pays monthly dividends
- Highly dependent on the performance of the real estate market
- Requires a long holding period for the greatest ROI
5. Peer-to-Peer Lending
Peer-to-peer lending, a form of direct lending, often has ROIs higher than 10%, but there’s no guarantee. P2P lending allows investors to act as lenders to consumers, providing unsecured loans. As you can imagine, there is more risk in peer-to-peer lending because you lend to consumers who typically can’t get approved by the average lender.
To invest in peer-to-peer lending, you must go through a peer-to-peer lending platform, such as LendingClub. You eliminate the middleman when you invest in peer-to-peer lending.
Most platforms allow you to invest in loans with as little as $25, diversifying your capital across many loans to reduce your risk of loss. Borrowers complete an application on the platform that evaluates the risk and ‘grades’ the loans based on their risk factors, giving them a letter grade of A to D.
The lower grade a loan has, the higher risk it poses, but you’ll also earn a higher rate of return. Platforms grade consumers on the following factors:
- Credit score
- Debt-to-income ratio
- Loan amount
- Reason for the loan
- Loan term
- Great way to help borrowers who can’t get traditional financing
- Pays much higher rates than most investments
- Low minimum investment requirements
- High risk of default
- It can be a long-term investment
6. Junk Bonds
Junk bonds are higher risk than investment-grade bonds but pay much higher rates of return than investment-grade bonds.
These bonds are investments in businesses with lower credit ratings as rated by Moody’s and Standard & Poors. The lower the ratings these firms give companies, the higher the interest rate they pay.
You can invest in junk bonds individually through a brokerage firm or index funds. For example, some ETFs focus solely on junk bonds.
- Not tied to the stock market
- Offers much higher ROIs than most investments
- Offers a way to diversify
- Very high risk of default since most companies have poor credit ratings
- It can be hard to find
7. Precious Metals
Precious metal investments may not be as common today, but they often have an ROI of 10% or higher.
This doesn’t mean you must go out and mine gold or even own precious metals. On the contrary, the easiest way today to invest in precious metals is through precious metal ETFs.
For example, the S&P GSCI Precious Metals Index is an ETF that tracks the precious metals index.
You might invest in silver, gold, or other precious metals. Like any investment, the key is
diversifying your funds so you don’t risk everything on one asset.
- It isn’t tied to the stock market
- Precious metals will always be valuable
- It can be owned as an ETF
- Not a common asset
- Hard to determine the best time to invest
Investing in fine art used to mean you had to purchase, store, and care for fine art. Today that’s not the case.
Even if you are an art curator, you can invest in art in other ways, including owning pieces yourself. However, eventually, you run out of room or the ability to care for the growing number of pieces.
Masterworks is an app that allows investors to invest in art or fractional shares of it. Since art can be costly, it excludes the everyday investor from its high ROI. However, on Masterworks, investors can purchase fractional shares of fine art with a minimum investment of $1,000 in most cases.
The downside is an investment in art long-term. You might sit on an investment for 5 to 10 years before seeing a return. So it’s important not to invest funds you’d need soon.
- Great opportunity for art enthusiasts
- Offers a different way to invest
- Masterworks offers a fractional share option
- You must hold the art for a long time
- It can take a long time to see an ROI
Wine lovers rejoice; you can invest in wine and earn an ROI greater than 10%! But there’s a catch.
As any wine lover knows, to properly store wine, you must provide the proper conditions, which is usually hard to do at home.
Fortunately, you can invest in wine through platforms like Vinovest. The platform does all the work, including storing and caring for the wines, but you own the wine bottles you invest in and can buy or sell as you wish.
Most wine investments are for two to three years, but some bottles require an investment as long as 20 years, so understand the investment terms before investing.
Unlike most other investments, you can choose to cash in your investment and drink the wine, but since you’re looking for a return on your investment, your best bet is to hold them for the desired time and then sell them for a profit.
- It can be a fun way to invest
- You can invest in wine without owning/storing it
- Great for wine enthusiasts who want to make money on their craft
- Highly illiquid asset
- You must know something about wine to make good investments
There are many ways to invest in a business. How you invest depends on your capital, your ability to run a business, and how long you want to hold onto it.
Own Your Own Business
The easiest way to invest in a business is to own a company. You can start a business that sells products or offers services. The sky’s the limit, and you can even do this on the side while you work your full-time job.
Consider what you do well and enjoy doing before choosing a business. Also, consider what’s needed to start the business legally and make it work for you. You can run the business for as long as you can manage and then sell it when it’s worth much more than you invested.
Owning your own business requires a significant time commitment, so be sure you have the time and ability to manage it while handling your other responsibilities.
- You have the freedom to run your business how you want
- You keep all the profits if you own it yourself
- You can fill a void in your community
- You risk 100% of the money you invest
- It can take a long time to see a return
Invest in Micro-Businesses
If you don’t want the responsibility of running your own business, you can invest in other businesses through platforms like Mainvest. On this platform, you can invest small amounts of money in different businesses, allowing you to diversify your investments.
Like any investment, risks exist, primarily if you invest in new businesses without much experience. Diversifying your funds can help mitigate the risk and allow you to enjoy a higher ROI without the responsibility of running a business.
- Opportunities to invest in multiple businesses without the work
- Can help other businesses
- It isn’t tied to the stock market
- Companies can go out of business
- High risk
Diversify Your Portfolio
Diversifying your portfolio is the key to the highest ROI. When you diversify, you offset the risk of a total loss.
The best way to diversify is to invest some money in stocks but then look at opportunities not tied to the stock market, such as real estate, businesses, fine art, metals, junk bonds, and peer-to-peer lending.
You increase your chance of higher ROIs when you spread your capital across as many avenues as possible.
What Is a Return on Investment (ROI)
The return on investment is the profit (or loss) you earn when investing in an asset. The ROI compares your profit or loss to your initial investment.
For simplicity’s sake, let’s look at a $100 investment. If you make $10, you’d have a 10% ROI.
Here’s the calculation:
$10 (profit)/$100 (initial investment) X 100 = 10% rate of return
Now let’s look at what it would look like if you had a loss. Let’s say you invested $1,000 but sold at $800. That’s a $200 loss and would look like this.
Here’s the calculation:
-$200/$1,000 X 100 = -20% loss
Keep in mind that if you have a gain, your value will be positive. If you experience a loss, your value will be negative.
Is a 10% ROI Common?
It’s not common to have a 10% return on investment on traditional investments like stocks and bonds. However, diversifying your investments across many assets increases your chances of a higher ROI.
The key to a 10% or higher ROI is taking risks. The higher the risks, the greater the reward, so you must be willing to handle some type of risk to get the higher rewards.
Is It Possible to Receive a 100% Return on Investment?
No investment offers 100% returns. The average ROI is between 7% and 8% on standard investments, but alternative investments may have a much higher return. The key is considering the risk involved and diversifying your funds to maximize your ROI.
What Is the Safest Investment With the Best ROI?
Consider ETFs if you want a high ROI but want to retain your liquidity and safety. They are automatically diversified investments, allowing you to make the most of your capital and earn the highest ROIs. In addition, if you keep the ETFs long-term, you increase your chances of a higher ROI.
What Is a Guaranteed Return on Investment?
A guaranteed return on investment means the asset pays a fixed rate of return. The returns aren’t based on market performance and instead promise a certain amount of return no matter what.
How Can I Make 10% on My Money?
Earning 10% or higher ROI is possible, but you need a high-risk tolerance. The key is to know the risk and compare it to what you can handle.
Then, decide if you want a passive or active investment, something outside the box, or a traditional investment, like stocks.