In the long term, the stock markets tend to outperform fixed income.
In the last year, however, interest rates have risen.
How can you make a safe income from your investments?
This article will consider the options, including some vehicles that pay over 8% per year, with capital protection.
If you want to invest as an expat or high-net-worth individual, email me (advice@adamfayed.com) or use these contact options.
Keeping money in the bank
Interest rates might have risen, but many banks only pay 3%-5% per year.
Even if you are getting 6% per year, this is often lower than:
- Inflation
- The alternatives available in the market
As Metro Bank’s, one of the UK’s leading challenger banks, troubles show, the banking sector has had its jitters in the last year.
Government bonds
Many emerging market governments, such as Turkey and Egypt, offer 8% per annum (or more) on government bonds.
As Ghana’s recent default shows, government bonds aren’t a risk-free asset.
This is especially the case when countries are lending a currency that isn’t theirs own.
Moreover, if interest rates increase, existing bondholders will likely see their investments fall in value.
If your investment decreases, getting 5% per annum on a yield isn’t much good.
Conversely, when interest rates fall, that is usually good for government bonds.
Therefore, the best time to buy government bonds is when interest rates will likely peek.
Real estate
Investors usually profit from real estate due to rental yields and leverage rather than capital appreciation.
If real estate falls in value, as has happened recently in places like the UK, South Korea and Hong Kong, yields usually increase.
Real estate might be a decent play in a few years, but right now, the risks seem high, given where we are in the interest rate cycle.
Alternative assets
Alternative assets include:
- Peer-to-peer lending
- Loan notes and private debt
- Private Equity
- Hedge funds
Some of these projects offer excellent yields of over 10% per annum.
However, they are the riskiest option on this list, and therefore, you need to either understand the risk or get a professional advisor to assess it for you.
A-rated corporate bonds
Some A-rated corporate bonds are producing 6%-8% per annum right now.
Coca-Cola and Halliburton are just two examples of companies offering north of 7% per annum.
Like the final option on our list, these options are typically unavailable on most do-it-yourself platforms, so you must go through companies like ourselves.
Professional-investor assets
The major investment banks, such as Goldman Sachs and BNP, provide professional investor-type assets.
Recently, we got access to a capital-protected investment paying 8.8% per year from BNP.
To get access to these investments, people typically need to either:
- Become certified as a high-net-worth investor
- Reach out to advisors such as ourselves
The downside of fixed returns of this nature is that there is typically a lock-in period.
Pained by financial indecision? Want to invest with Adam?
Adam is an internationally recognised author on financial matters, with over 760.2 million answer views on Quora.com, a widely sold book on Amazon, and a contributor on Forbes.
