Where to find higher yields

Here's how to make more on your savings

At a time when the best CDs are barely paying 2%, everyone's looking for a way to earn more on their savings.

Here are seven of our favorite options for boosting your yields to 3%, 5% or even more.

None is federally insured, so with one notable exception, you'll have to assume more risk in pursuit of better returns.

But even the best CD rates from the hundreds of banks and credit unions in our extensive database barely keep up with inflation.

So if you're playing it safe, you're already losing money.

What's worse is that the Federal Reserve seems determined to hold interest rates at record lows for at least the next couple of years.

That means we're still several years away from what we'd consider to be reasonable returns on bank deposits — think 3% on a 2-year CD and at least 5% on a 5-year CD.

Can you afford to wait that long? Or should you be looking to put at least some of your savings in a riskier but more lucrative investment?

Paying down high-cost debt

Paying down your debt offers a guaranteed, risk-free return that is greater than any yield you'll find.

Melody Juge, founder and managing director of Life Income Management in Deerfield, Mich., says paying off debt now will give you more to save down the line.

Let's say you were carrying $10,000 on a credit card at a 15% interest rate and making a minimum payment of 1% of the principle plus interest. At that rate, it would take 28 years and a whopping $12,000 in interest to pay it off.

Bump up the payments to $400 per month, and you'll pay it off in only three years and with only $2,000 in interest charges. That's a savings of $10,000.

"If you're paying credit card debt at 235, forget about savings until you buckle down and pay that off, Juge says."You'll end up better off in the long run because you'll pay far less interest."

Dividend-paying stocks

Many well-known companies are paying dividends of 3% to 5%, and more members of the S&P 500 are paying dividends than at any point since 1999.

Dividends are the income-generating potential of a company, much like the interest you earn from a certificate of deposit. They're paid quarterly, so if the stock pays an annual dividend of $2, you'll receive four payments per year of 50 cents for each share you own.

Some top dividend-paying companies include Exxon Mobil, Proctor & Gamble, Verizon and Caterpillar.

One way to minimize risk is to consider a high-dividend ETF that invests in dozens of dividend-paying companies.

SPDR S&P Dividend ETF (SDY) currently yields 2.21% and has an expense ratio of 0.35%. There's also the First Trust DJ Global Select Dividend Index Fund (FGD), which tracks an index of 100 global mid-cap and large-cap dividend-paying stocks. It currently yields 4.46% and carries an expense ratio of 0.6%.

Real estate investment trusts

More commonly known as REITs, real estate investment trusts invest in everything from shopping malls to apartment complexes.

A REIT offers an investor the opportunity to invest in real estate without taking on debt and the hassle of actually owning real estate. Investors earn money through dividends from rent and with capital gains when the price of the REIT goes up.

Ronald Kuykendall, vice president of communications for the National Association of Real Estate Investment Trusts, says the average REIT currently yields 4.04%.

"REITs give investors the benefits of investment in large-scale, income-producing real estate," Kuykendall says. "They get the advantage of a continuing income stream but also the opportunity for long-term price appreciation."

For broad exposure to a variety of REITs, consider the Vanguard REIT Index. It has a minimum initial investment of $3,000 but yields 3.81% and has an expense ratio of only 0.24%.

P2P lending

Peer-to-peer lending is where you loan money to individuals through websites such as Prosper.com or LendingClub.com.

Peter Renton, the CEO and founder of Lend Academy, which advises investors on P2P lending, says annual returns range from 6% to 18%.

Loans range from one to five years, and the riskier the borrower, the higher the interest rate on the loan.

Renton says you can customize a portfolio of loans based on your risk tolerance and minimize your risk by spreading your money across multiple loans with a $25 minimum investment.

By investing $1,000 in 40 loans, you won't lose everything if a couple go bad. Those typical returns of 6% to 18% include losses from defaults.

Renton says P2P investing is a high-yield product with low volatility that is not closely correlated with other asset classes.

"These platforms now have a proven track record for many years in providing excellent returns to investors," Renton says.

Rental homes

Buying a house or condo to rent out takes work and perseverance, but becoming a landlord can provide a nice return over the long run.

Ideally you'd pay cash for the property, but many lenders will finance up to 70% of the value of a rental.

You'll want a property that can generate a positive cash flow. Brandon Turner, senior editor of BiggerPockets.com, says expect to spend 50% of your rental income on the mortgage, insurance, maintenance and other expenses.

The "2% rule" says the property should fetch a monthly rent of 2% of its purchase price. But in many markets even less than 1% can produce a decent return.

Rental property should be seen as a very long-term investment  — think 20 years or more. Over time, you'll be able to boost rents and benefit from some price appreciation on the property.

If you're willing to take the risk and put in the time, $30,000 could provide a better yield as a down payment on a rental property than it would in a CD.

Check out our 7 smart moves for getting started as a landlord for more advice.

International bond funds

You won't earn much in U.S. bonds nowadays, but if you look abroad to other countries, you could make up to 5% on your savings without taking on a lot of risk.

Foreign governments use bonds to borrow money and finance public spending much like Washington, does. And bonds in many stable, trustworthy countries are paying a lot more than the 1% you'll earn here.

Mari Adam, president of Adam Financial Associates in Boca Raton, Fla., says there are many solid, well-run international bond funds earning 3% to 5%.

"Don't assume that all international bonds are riskier than their U.S. counterparts," she says. "Many foreign countries, including some emerging-market nations, have less debt and stronger balance sheets than the U.S."

The Templeton Global Total Return fund (TGTRX) boasts a yield of 4.52% and an expense ratio of 1%. Another popular fund is the PIMCO Global Bond Fund (PGBIX), which has a current yield of 2.06% and an expense ratio of .55%.

Farmland

One rarely discussed option for long-term yields is to buy and lease farmland.

Lloyd Brown, president of Hertz Farm Management in Nevada, Iowa, says farmland has seen an average annual return of 10% — 5% from net operating income and another 5% from appreciation — over the past 50 years.

You can find tillable acreage to buy through a company like Hertz or on such sites as Landflip.com and Landandfarm.com. Price per acre can vary dramatically by area, from less than $1,000 per acre to $20,000 or more.

Brown says most farms are a minimum of 30 acres, but the most common size is 80 acres. Soil and climate are critical in determining what can be grown there and go a long way toward determining the value of the land.

"Over the past few years, the cash rate of return has been about 4%," Brown says. "If you're talking about a piece of land at $10,000 per acre, you could expect $350 an acre or more cash rent."

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