Financial Education

5 top financial investments for higher returns

June 8, 2021
14 min
5 top financial investments for higher returns

But, deciding which assets to invest in is never easy, there are many factors to consider such as your investment timeframe, risk tolerance, financial goals and life stage. It is equally important to invest in high-growth assets such as equity investments that give you higher returns to stay ahead of inflation and give you more value on your investment assets! After all, that is the real purpose of investments.

What are the best investments for higher returns?

First things first, all investments are assets but not all assets are investments. Let us explain. A car, for example, is considered an asset, but it’s not an investment as it depreciates over time – as opposed to shares or property which typically increase in value in the long-term despite fluctuating prices. In our other article you will get an overview of all asset classes.

As an investor or wannabe investor, you want to put your money into assets that will generate higher returns and therefore boost the value of your portfolio. Check out the top five financial investments for higher returns below. Here are some tips you need before you start investing.

1. Engage with exchange-traded funds (ETFs)

Exchange-traded funds (ETFs) are one of the most popular investment options, offering diversification with low-cost access to a variety of asset classes, industry sectors, and international markets. An exchange-traded fund (ETF) is a diversified basket of securities or assets like shares and bonds that tracks the underlying index of a stock exchange like the EuroSTOX 50, DAX or S&P 500.

ETFs are passively managed, which means they have lower administration costs and are more tax-efficient than managed funds. The estimated average yearly return on ETFs is about 7% - 9%, depending on the tracked index. Be sure to compare the performance and fees of different ETFs before making a final decision and get advice from a financial advisor. You can buy and sell ETFs on any given stock exchange through a stockbroker or bank, just like individual stocks.

2. Do invest in dividend stock funds

Dividend stocks are known for being one of the safest and most reliable investments. Dividend investing involves purchasing stocks that issue dividends in order to create passive income. Dividends which are portions of a company’s profits are typically paid out to shareholders on a quarterly basis.

Dividend stocks can yield between 2% - 4% returns per year, depending on the index listed and market conditions. The benefits of dividend stocks are twofold – a) they allow you to have capital growth on your investment through long-term market appreciation and b) they also earn cash in the short term. You can determine a company’s dividend safety score by looking at factors like payout ratios and earnings reports. You can buy dividend stocks through a stockbroker or bank.

3. Make money with managed funds

Managed funds pool together the money of individual investors into one fund that is invested by a fund manager. Managed funds, sometimes called mutual funds, can help you diversify your portfolio across various asset classes like shares, bonds, property or cash, as well as sectors and international markets. This can help with mitigating investment risk. Entry costs for this type of investment are also cheaper than buying shares directly, as fees are shared with other unit holders.

The performance of mutual funds will vary depending on investment types (i.e. aggressive or moderate), sectors and markets invested in. Historical returns on different types of managed funds can range between 2.5% and 20%. It’s important to find a trusted wealth manager (we’ve got lots) to help you maximise your returns on any investment.

4. Say hi to high-yield bonds

You can think of high-yield bonds as a middle ground between stocks and bonds. They are considered riskier than traditional bonds, but they’re still less volatile than the stock market. High-yield bonds are corporate bonds that have lower credit ratings (below BBB or Baa3) than investment-grade bonds. High-yield bonds therefore pay higher interest rates, as they have a higher default risk − to compensate investors (you) for taking on the risk. Read about the difference between shares and bonds.

Looking at historical performance since the 1980s, high-yield bonds have produced yearly returns from anywhere between 5% - 30%. Even during the lows of the late 1990s, high-yield bonds still yielded 8% - 9% yearly. It’s also important to note that high-yield bonds don’t always keep their low investment-grade score − events like credit rating upgrades, improved financial reports, mergers and acquisitions, management changes and product developments can increase the value of high-yield bonds and improve their credit rating.

Especially in the field of high-yield to buy a mutual fund is a very good idea. An investment manager is checking and visiting each company and only invests in the good ones. An ETF on the other hand is investing along a benchmark where the biggest depositor has the highest weight. But in this field the company with less dept is healthier.

5. Call on cryptocurrency

Cryptocurrency, also known as virtual currency or digital currency is used as electronic money. This means cryptocurrency doesn’t physically exist in coins or notes. Cryptocurrencies are used as payment systems to execute contracts and run programs. Bitcoin was the original cryptocurrency launched in 2009, and today over 4,000 cryptocurrencies are circulating. Cryptocurrency units, like coins or tokens are created through a process called mining, using code and an encrypted string of data blocks, known as a blockchain.

While investing in crypto can offer some huge returns either via trading or staking (or mining) − it’s worth noting that cryptocurrency markets are extremely volatile which makes cryptocurrency one of the riskiest investment options. It’s definitely important to do your research before investing in cryptocurrency. Things to look into include projects and technologies behind a certain cryptocurrency, its market capitalisation, price fluctuations, history and so on.

A possibility to profit from the cryptocurrency boom with less volatility would be to invest in the US company NVIDIA. The graphics cards produced by this company are mainly used to mine cryptocurrencies.

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Increase your investment returns with a wealth manager

The best way to maximise your returns on existing investments or to invest in assets that will generate higher returns is to speak to a qualified wealth manager who will be best placed to recommend specific investments based on your financial goals, investment timeframes, and available capital.

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The content in the blogs is solely for general information and to help potential clients get an idea of how we work. They are not recommendations that should lead to the purchase or sale of assets and are not investment advice. Marmot.Finance cannot judge whether and how the statements made fit your investment objectives and risk profile. If you make investment decisions based on this blog entry, you do so entirely at your own risk and responsibility. Marmot.Finance cannot be held responsible for any losses you may incur as a result of information contained in this blog entry.The products mentioned are not recommendations, but are intended to show how Marmot.Finance works and selects such products. Marmot.Finance is also completely independent and does not earn money in any form from product providers.

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