High Yield Fixed Income

High Yield Fixed Income investments reviewed. Read more here.

Top 5 High-Yield Fixed Income Investments

For anyone looking to achieve growth in their portfolio, the idea of high-yield fixed income investments sometimes seems too good to be true. Things like bonds and CDs undoubtedly come with much lower risk than their more volatile investment counterparts, but their returns are often disappointingly low, sometimes not even outpacing inflation. That’s why, in the financial industry, there’s always a low-level scramble to find the best high-yield fixed income investments. Some gain popularity for a little while before fading into the background, while others stay popular but generally don’t promise the best possible returns.

The truth about high-yield fixed income developments is something that many people don’t want to hear—that there is no magical investment that will help you earn huge returns practically overnight. Many financial firms have tried to create such magical investments, but that’s exactly why we ran into so much financial trouble circa late 2008. These days, it pays to be smart and relatively conservative. Trying to game the system is not a sustainable tactic.

With that in mind, here are the top five high-yield fixed income options for smart, careful investors who want to grow their funds over time.

1. Savings accounts: Savings accounts may not be the most glamorous investment resources in the world, but they do get the job done in the most reliable way possible. High-quality savings accounts insured by the relevant federal authorities are a simple and easy way to gain between 1% and 2% on your holdings. Of course, the more money you can invest, the higher your returns will be. Anything under 10,000 is generally not worth the trouble.

2. Money market accounts: Money market accounts are similar to savings accounts, with two major differences. First, they may not be insured, which puts you at risk in the event of a bank collapse. Second, they usually have higher minimum balances than savings accounts. In exchange, you get a higher interest rate.

3. CDs: Certificates of deposit (CDs) are essentially savings deposits that have fixed terms—often six months, a year, or five years. Unlike other high-yield fixed income investments, they are insured, which makes them a highly reliable investment tool. They are especially useful when the economy is going well and interest rates are high. At other times, lower interest rates can make CDs less attractive to investors.

4. Government bonds: Government bonds are widely regarded as among the safest investments out there. Their yields are generally not as high as those offered by other types of bonds, but their reliability creates an appealing trade-off. And although the yields aren’t huge, they are usually higher than those of savings accounts and CDs.

5. Corporate bonds: When it comes to corporate bonds, there are literally thousands of options for investors. The lower-rated ones (meaning that the company has a higher risk of default) generally come with higher interest, while the more secure and less volatile companies have lower interest rates. A balanced portfolio should ideally have investments across both categories.