With interest rates at 15-year highs, investors can use high-interest savings accounts to better grow their money. People also have a number of other options in that regard. To help investors make the most of their finances in the next year, here are the best high-yield savings alternatives for 2024.
These are accounts that work just as traditional savings accounts do — money is deposited and earns interest. High-yield accounts, though, usually offer better interest rates.
When it comes to growing money, people have quite a few options. Those include:
Cash Management Accounts. Typically provided by broker-dealers or advisory firms, these accounts can earn competitive interest rates.
Pros. There are no restrictions on withdrawals, they offer potentially high interest rates, and they are federally insured.
Cons. Interest rates may not be competitive, and some top features may not be offered. There also may be no in-person customer service.
Certificates of Deposit. These savings accounts hold a fixed amount of money for a fixed time period, and in exchange, the financial institution pays interest.
Pros. These accounts are relatively safe, have a potentially higher rate than a money market account or high-yield savings, and offer laddering strategies.
Cons. Early withdrawals are penalized, rates may not keep pace with inflation, and the account may offer less liquidity than some other accounts.
High-Yield Money Market Accounts. These have above-average annual percentage yields that help savings to grow over time.
Pros. These accounts provide flexibility, competitive rates, safety, and easy access.
Cons. They are susceptible to greater losses and sensitivity to economic changes, can be illiquid, and may present valuation issues.
Peer-to-Peer Lending. With this form of lending, personal loans are funded by individual investors.
Pros. These accounts can offer diversification, lower interest rates, and easy-to-use platforms, and faster approval.
Cons. There may be additional fees, borrowing limits, liquidity issues, and possible restrictions on withdrawals.
Online Savings Accounts. Available exclusively online, these accounts offer digital tools for deposits and account management.
Pros. There are a myriad of banking features, higher rates, minimum balances, and lower fees.
Cons. Service issues must be managed online or over the phone. No personal relationships, certain services are unavailable.
High-Yield Checking Accounts. Offered by some banks and credit unions, these accounts work like regular checking accounts but provide an above-average APY.
Pros. These accounts offer free checking, no minimum balance requirements, and the potential for high annual percentage yields.
Cons. A minimum balance is usually required, and there may be no earned interest if the account is improperly managed.
Private markets provide access to opportunities, assets, and strategies that are largely unavailable through public markets. Such markets, in which the alternative investment platform Yieldstreet plays a major part, are generally less volatile and offer portfolio diversification. Here are some ways one can invest in these markets.
Investing in Real Estate
Potentially offering consistent secondary income, property appreciation, and tax favorability, real estate remains popular as an alternative investment. There is an abundance of ways to enter the market, including through real estate investment trusts, or REITS, which especially suits those who seek passive property ownership without responsibility for the physical property.
Investing in Art
Once the exclusive province of institutions, the wealthy, and those with extensive market knowledge, art continues to rise in popularity as an alternative investment. This is particularly evident online, where increased market transparency and access are drawing more participants. Rather than owning physical properties, many investors are turning to art funds, for example, which offer fractional ownership. Also, their directors make all strategic investment decisions — so the investor does not have to.
Investing in Venture Capital
A type of investor financing that is a form of private equity, venture capital is provided to startups and small businesses. There are ways to invest in venture capital that expose retail investors to private companies that are either creating new sectors or disrupting existing ones, and ultimately, potentially,
Investing in Private Equity/Private Debt
An investment in private equity (PE) — an alternative asset class — can offer lucrative returns to those with risk tolerance. Its independence from the stock market can mean mitigated volatility and less downside sensitivity, relative to publicly traded equities. Platforms such as Yieldstreet offer accessible minimums as well as options for early liquidity, in addition to opportunities in private debt that were previously inaccessible.
In general, checking accounts are best suited for spending money. On the other hand, savings accounts have federal restrictions on the number of monthly withdrawals. Because they generally have higher interest rates, these accounts are best for saving cash.
While savings accounts provide more flexibility in terms of withdrawals, CDs generally offer higher interest rates than high-yield savings.
Investing always carries some degree of risk, while there is no risk with high-yield savings. However, investing can also offer more lucrative returns.
Investors in the stock market must be constantly vigilant of inherent fluctuations, which can cause a great deal of stress. To mitigate that, investors are increasingly turning to “alternatives” — asset classes such as art and real estate that are not directly related to public markets.
Not only can alternatives decrease overall portfolio volatility, but they can help improve returns, provide consistent secondary income, and protect against inflation. Historically, private markets have performed better than stocks in every economic downturn of the last 15-plus years.
Consider Yieldstreet, the leading alternative investment platform on which nearly $4 billion has been invested to date. It offers the broadest selection of curated, highly vetted alternative assets available, with a 9.6% IRR and returns exceeding $2.3 billion.
Such asset classes provide another essential purpose, and that’s portfolio diversification. Holdings that contain a mix of asset types and expected returns can lessen overall portfolio risk. In fact, diversification is a key pillar of long-term investing success.
Alternative investments can be a good way to help accomplish this. Traditional portfolio asset allocation envisages a 60% public stock and 40% fixed income allocation. However, a more balanced 60/20/20 or 50/30/20 split, incorporating alternative assets, may make a portfolio less sensitive to public market short-term swings.
Real estate, private equity, venture capital, digital assets, precious metals and collectibles are among the asset classes deemed “alternative investments.” Broadly speaking, such investments tend to be less connected to public equity, and thus offer potential for diversification. Of course, like traditional investments, it is important to remember that alternatives also entail a degree of risk.
In some cases, this risk can be greater than that of traditional investments.
This is why these asset classes were traditionally accessible only to an exclusive base of wealthy individuals and institutional investors buying in at very high minimums — often between $500,000 and $1 million. These people were considered to be more capable of weathering losses of that magnitude, should the investments underperform.
However, Yieldstreet has opened a number of carefully curated alternative investment strategies to all investors. While the risk is still there, the company offers help in capitalizing on areas such as real estate, legal finance, art finance and structured notes — as well as a wide range of other unique alternative investments.
Moreover, investors can get started with a relatively small amount of capital. Yieldstreet has opportunities across a broad range of asset classes, offering a variety of yields and durations, with minimum investments as low as $10,000.
Parking one’s cash in a high-yield savings account can be a smart move since it allows savings to grow faster than they would in an average savings account. There are certainly a number of options. However, investors should also consider that there are alternatives to such accounts that can be used along with, or in place of, a high-yield account, including in the private market.
Yieldstreet provides access to alternative investments previously reserved only for institutions and the ultra-wealthy. Our mission is to help millions of people generate $3 billion of income outside the traditional public markets by 2025. We are committed to making financial products more inclusive by creating a modern investment portfolio.