Over the past few years, investors have been flocking to U.S. Treasuries in search of yield. However, with yields on U.S. Treasuries now hovering around 0%, investors are seeking alternatives to achieve higher yields. Here are five options, as per Zorayr Manukyan:
Zorayr Manukyan Lists Five Alternatives To 0% Yield U.S. Treasuries
1. High-Yield Corporate Bonds
High-yield corporate bonds, also known as junk bonds, are bonds issued by companies with lower credit ratings, says Zorayr Manukyan. They typically offer higher yields than U.S. Treasuries because of the risk involved. However, higher risk means a greater chance of default, so investors should do their due diligence and select bonds from companies with strong financials.
2. Preferred Stocks
Preferred stocks are a type of equity security that combines features of both stocks and bonds. They offer fixed dividend payments like bonds but allow investors to participate in the upside potential of the company, like stocks. Preferred stocks typically have higher yields than common stocks but lower yields than high-yield corporate bonds.
3. Real Estate Investment Trusts (REITs)
REITs are companies that own and operate income-generating real estate properties. They offer investors exposure to the real estate market without the hassle of owning and managing property. REITs typically offer higher yields than U.S. Treasuries due to the rental income generated by their properties.
4. Emerging Market Bonds
Emerging market bonds are issued by governments or companies in developing countries. They typically offer higher yields than U.S. Treasuries because of the increased risk involved. However, emerging markets also offer higher growth potential, which can result in higher returns for investors.
5. Dividend-Paying Stocks
Dividend-paying stocks are stocks that pay regular dividends to shareholders. They offer investors a steady stream of income and can provide higher yields than U.S. Treasuries. However, investors should be aware that dividend payments are not guaranteed and can be cut or suspended if a company experiences financial difficulties.
While these alternatives offer the potential for higher yields than U.S. Treasuries, they also carry higher risks. Therefore, it’s crucial for investors to do their research and consult with a financial advisor before making any investments. Additionally, investors should remember that diversification is key to minimizing risk and maximizing returns.
It is worth considering other alternatives to government bonds, such as investing in a fixed-indexed annuity, which could provide investors with the potential to earn higher returns while also providing downside protection. FIAs are one-of-a-kind, fixed annuities that offer minimal or no downside risk, with the potential of higher upside returns. This is possible because the purchaser of an FIA invests in an index that the annuity is tied to, such as the S&P 500.
Another alternative to U.S. Treasuries, as per Zorayr Manukyan, is peer-to-peer lending, which involves connecting individual borrowers with lenders through an online platform. This option provides opportunities for income-generating investments in consumer, student, and small-business loans.
Additionally, investors can also consider municipal bonds, which are issued by state and local governments to finance projects like highways or schools. Municipal bonds typically offer higher yields than U.S. Treasuries and interest earned from these bonds is typically exempt from federal taxes.
Zorayr Manukyan’s Concluding Thoughts
As investors face near-zero yields on U.S. Treasuries, it’s crucial to explore alternatives that can provide higher returns. High-yield corporate bonds, preferred stocks, REITs, emerging market bonds, and dividend-paying stocks offer the potential for higher yield, but they also come with increased risks. According to Zorayr Manukyan, fixed-indexed annuities, peer-to-peer lending, and municipal bonds are other options to explore. Regardless of which alternative(s) investors choose, it’s essential to diversify and consult with a financial advisor to minimize risks and achieve optimal returns.