If you are looking for a good place to put your money right now, here are a few ideas that can put — or help you keep — a little more coin in your pocket. (For related reading, see: Gold Is Glittering in 2016: Here Are 4 Reasons Why.)
- Internet banks: Unlike brick-and-mortar banks, these banks have relatively low overhead and can pass some of those savings onto their customers in the form of fewer fees and higher yields on CDs and demand deposit accounts. Aspiration and Everbank are two online banks that offer more competitive terms to their customers. Although their rates are still low, they can save their customers a substantial amount of money each year from ATM fees.
- Short-term CDs: If you aren’t going to need your money for a year or two, consider purchasing a short-term certificate of deposit that pays a higher rate than a savings account. But don’t buy one that has a very long maturity, because you don’t want to lock in a low rate today and then see interest rates start rising in the near future. Rising rate CDs that increase the rate they pay after a certain period of time can be another possibility, but in many cases these instruments pay an initial rate that is so low that it negates their advantage.
- Pay off debt. If you have credit cards that are charging you 17% interest, then it may not make much sense to stash your money somewhere that’s only paying you 1%. Wiping out your credit card balances can save you a bundle, and they can also then function as a type of emergency fund. Of course, that’s not as good as having money in the bank, but it sure beats paying an exorbitant rate of interest to a lender while earning virtually nothing. (For related reading, see: 3 Expensive Mid/SMID Cap Mutual Funds Worth Your While.)
- Write covered calls: If you understand the options market and would like to increase your rate of return, writing covered calls will provide you with another stream of income on top of any dividends or capital gains that you receive. Use your spare cash to pick up a round lot or two of a solid blue-chip offering and move the proceeds from your call writing into a high-yield money market fund.
- Fixed annuities: If you are looking for a longer term investment that pays more than cash instruments, fixed annuities may be a viable alternative. These vehicles usually pay more than CDs, and their surrender charge schedules typically mature in five to seven years. They are relatively safe to invest in, as annuity carriers are required by law to have a cash reserve that back each of their contracts on a dollar-for-dollar basis. (For related reading, see: How to Play a Sideways Market.)
- Longer term CDs: If you have a longer time horizon for your money — such as five years — then consider buying a long-maturity CD that is issued by one of the national banks through your broker. Look for offerings that will allow you to redeem your CD early with a put feature, so that you won’t get locked in at a lower rate for a long period of time.
The Bottom Line
These are just some of the ways that are available for you to get more bang for your buck. Other ideas include buying utility or preferred stocks that pay higher dividends, although their prices will decline when rates start to rise. For more information on how you can best put your money to work for you, consult your financial advisor. (For related reading, see: Active Traders Are Turning to Soft Commodities for Answers.)