Cut through the noise for a ranking of the five highest return investments
Turn on the TV or click over to your favorite investing website and you´re likely to get a dozen stock picks within the hour. The financial media loves to have you chasing stocks but are they really the best investment for your money?
It’s an important question that most investors don´t take the time to ask. Settling for that 8% annual return on stocks gives you just $340,000 at the end of 30 years if you invest $250 a month. That´s not bad but it´s not going to make you rich…maybe ramen noodles rich.
Get just four percent more, an annual return of 12% and you double that portfolio value to over $700,000 and get just a few percent more, a 15% annual return and you can retire on over $1.3 million!
That´s what I want to do in this video, reveal the five highest return investments, that will make you rich…faster.
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We´re not talking vague ideas like “invest in yourself” but real investments you can make to grow your dough. I´m Joseph Hogue, your Bow Tie believer, and we´re counting down the five high return investments you can make right now!
Real Estate for High Returns
Number five on our list, rental real estate with a 12% annual return.
No other asset class has produced as much family wealth as real estate investing. Besides a cash-on-cash return of between ten- to 14% according to the National Real Estate Investors’ Association, you get a tax break and pride of owning a real asset.
Rentals can be residential properties to individual tenants or large multi-family apartments, or can be commercial properties like retail stores, office space and even self-storage units. Residential rentals generally require more management time as you look for tenants and make repairs but can also mean higher returns.
The biggest drawback to rental real estate is the large down-payment needed to start. Lower-cost alternatives include house-hacking where you buy a duplex with a smaller down-payment loan through the FHA or other programs and then rent out one unit. You can also invest your money in real estate investment trusts, or REITs, until you build up enough for a down-payment.
Small Cap Stocks for Market-Beating Returns
Next on our list of high return investments, small cap stocks with a 12.3% annual return.
These aren’t just any stocks. Small cap stocks are companies valued under a billion dollars and represented by the Russell 2000 index. These companies tend to outperform larger competitors like those in the S&P 500 index because of their financial flexibility and innovativeness.
Smaller companies can turn on a dime to meet customer needs and it’s always going to be easier to book faster growth. Growing sales of $50 million by 20% means only adding another $10 million to the top-line. Booking that same 20% sales growth for a monster like Apple with $270 billion in revenue means adding over $50 billion in new sales!
And while that extra 0.3% return for small cap stocks over real estate may not seem like much but remember, this is an investment that requires no work on your part. You´ll never have to fix plumbing or evict a tenant with these high return stocks.
You can screen for small cap stocks yourself or just invest broadly with funds like the iShares Russell 2000 Index ETF, ticker IWM. If you’re investing in individual companies; look for stocks with a market cap between $200 million to $1 billion, with less debt and consistently rising revenue.
How to Invest in Tax Liens for High Yield
Number three for best investment returns is tax liens with a 15% average yield.
Tax liens are legal notes sold by the county assessor and backed by a property when the owner doesn’t pay their property taxes. By selling the back taxes owed to investors, the county gets its tax money immediately and the investor gets a rate of return.
Returns and the process for investing differs by county but most of these notes promise around a 2% monthly return for as long as the back taxes go unpaid. If the property owner doesn’t catch up on the taxes within a certain period, usually 24 to 36 months, the tax lien holder can take possession of the property…potentially getting real estate worth hundreds of thousands for just a few thousand in taxes paid.
The reason why these don’t average a higher return is the vast majority of tax liens are paid off within six to nine months. Property owners don’t want to lose their homes and banks don’t want their mortgage wiped out for just the tax amount.
Tax lien sales are usually conducted by auction so contact your local county assessor to see how to participate. You’ll pay an entry fee to the auction and will be able to bid on lien certificates. You don’t have to be a resident of the county to buy tax liens which means you can visit counties all over the country to take advantage of this high return investment!
Equity Crowdfunding Returns
We’re counting down the highest return investments and next on our list is startup investing and equity crowdfunding with a 27% annual return.
This was my life as a venture capital analyst and I saw investors book some massive returns. Startup investing is pooling your money with VC firms or angel investor groups to invest in early-stage companies before they issue shares on the stock market.
A study by Willamette University of nearly 3,100 early-stage investments found investors booked an annualized 27% return on their money over a three and a half year period. That’s 2.6-times your money in less than four years!
This is a high-risk, high-return investment and more than half of the new startups are likely to return less than your original investment. Invest across a portfolio of five to ten companies and you can have a few that will blow the doors off with returns of ten- and 20-times your investment.
It used to be that only rich investors with over a million dollars net worth could invest in these but thanks to the JOBS ACT of 2012, anyone can invest through equity crowdfunding platforms like Republic and AngelList.
This isn’t like picking stocks though. There’s less analysis on these startup companies by investors so you’ll have to do your own on each investment. That means looking through the financial statements, analyzing the product and the market and making sure management has what it takes to make the business a success.
Do this financial homework though and that 27% annual return can turn a single $10,000 investment into a million dollars in just two decades.
Highest Return Investment – Start a Business
Now our number one high return investment, building your own cash flow business.
Returns can vary dramatically here so I’ll just share my numbers. I started three websites in 2014, spending less than $300 to get them all ready. In that nearly six years, I’ve averaged $2,000 a month in expenses and made over $450,000 income for an annualized return of nearly 600%!
That’s not counting the time I put in to run the business so those triple-digit returns don’t come without a cost but you’ll never find a better investment return than creating your own assets.
This one isn’t as easy to get started but this is how the rich make their money. A survey of more than 2,500 millionaires across 17 countries found they had more than 30% of their money in their own business. It isn’t in stocks or even real estate but in creating those business assets that cash flow every single month.
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The highest return investments don't come without risk but with some planning and analysis, you can moderate the risk while still collecting high returns. Put together a portfolio of high yield investments and watch it grow!