Earning money is never an easy task. If you want to know the sum that you can make from 1 million dollars per year, you can’t exactly provide the digit amount. It depends on a number of factors. These factors include the interest rate.
If you don’t have any knowledge of the economy and market conditions and where you invest, it is better to hire the CFA (Certified Financial Planner) or CPA (Certified Public Accountant) who will provide you good advice regarding your money.
What are the economic conditions? Whether there is instability? Inflation rates? Loan rate? And a lot more. You need to know each factor first to estimate the interest you can earn. If the interest rates are higher, it is better as it can result in earning a significant amount of money in the long periods of time.
A million dollars is a great amount of money, and one can get various amounts of interest per year by investing it in different sectors. But this much amount of Defining the exact amount, however, is not possible as the number varies relying upon the kind of investment that you do other than the factors mentioned above. There are various options and ways in which you can invest the million dollars.
The first way where you can invest million dollars is through US Treasury bonds. The present rate for a 30 year US Treasury security is 3.08% so you would gain roughly $30,800 from the one million dollars every year. That’s a good investment. Depending on the country you live in and the current rate, you can speculate the amount you can earn.
Municipal bonds are also guaranteed through the government, but have a much shorter turnover time. They are more localized and are a way to have citizens finance government projects, and make some income on the process. Rates vary from around 3-5%, and terms from 6 months to a few years. This means that you can usually land a 5% return in a year, making you $50,000 tax-free each year!
If you decided to put the 1 million dollar saving account, it is not a good choice of investment as you could expect to earn only one thousand dollars each year which is a very little amount. That being said, you can still reliably get 1-2% return each year with a high-yield savings account with a firm like Ally.
Putting your money on the stock market can offer good returns for individuals needing to invest one million dollars, yet they are far riskier than any of alternate securities. But higher risk, higher returns. The risk can be reduced by investing your money in various companies that have been there for a long time and earn stable profits.
One good advantage of investing in more than one company increases your portfolio, in case you lose money from one company, you can earn from the other. This diversification reduces risk to a great extent.
Mutual funds are another option, and it is less risky, but at the same time, the rate of interest is also lower. The interest rate for stocks also varies. It truly relies on your investment strategy and market conditions.
This interest rate fluctuates. For instance, if you have invested one million toward the start of 2003, you would have earned an arrival of 3.54% per year. That would equal to $1,326,817.31 per year. If you invested the same amount at the start of 2007, you’d have an annualized return of – 2.48%, which means you will lose an average of $18,906.27 a year.
Index funds are similar to mutual funds in that they compile different stocks and invest in them as a group. Indexes like such as S&P 500 average a 7-8% return each year and are pretty reliable. this is a good way to get into market investing without as much knowledge, as the S&P 500 simply invests in the top 500 performers in the market each year.
Get Corporate Bonds
Corporate bonds are another investment choice for 1 million dollars. The return on these government bonds are low, and you can lose money depending on the inflation rates. But in 2017, inflation rates are expected to rise. So instead of investing in government bonds, you can invest in high credit companies as they pay higher yields with limited risk.
A Real Estate Investment Trust (REIT) is an organization that owns and manages properties such as buildings, shopping plazas, and offices. This sector usually gives a high return, and so there are many advantages of investing in this sector. Real estate is a tangible asset, so inflation is a hedge against inflation. Investors hold an asset that appreciates in value and at the same time earn profits.
You can also abandon the interest idea and simply buy properties. These are assets you can rent out to net a few hundred dollars of extra income each month while someone else pays your mortgage. Come retirement, you can keep making money off of the properties, or liquidate so you have a hefty chunk of change to sit on!
What is Right For You?
As far as the route you should take, it really depends on what your goals are. Different investors value different aspects of an investment, and your taste may vary. The timeframe you’re working under can also have a massive effect.
Short-Term Investors (3-5 Years)
If you’re looking to make a lot of money in the short-term, strategic single stocks, and aggressive mutual funds will be your move. Keep in mind the elevated risk, because higher possible gains often mean higher possible losses. If you get an experienced financial planner, though, the mutual funds can be a very lucrative play without risking it all.
Long-Term Investors (6-15 years)
For the ones who are investing long-term, but aren’t wanting to wait until retirement, mutual and index funds are a great way to get reliable gains without having to worry too much. They are extremely consistent, and they net you substantial gains in the meantime on a million-dollar portfolio.
Retirement Investors (15+ years)
If retirement is your priority, nothing beats 401(k)s and Roth IRAs. They are tax-sheltered, which automatically increases your gains by quite a bit. They are also some of the most reliable investments you can invest in. There are a must-have for anybody, and if you haven’t started allocating funds to a retirement account, you need to start.
|Apps||Fees and Minimum||Best For|
|Betterment||0.25% per year|
no account minimum
Saving for retirement
|Ellevest||$1-$9 per month|
no account minimum
|Retirement especially for women|
|Personal Capital||Free||Planning retirement|
Real estate is also a good move here, as you can rent out a home and essentially have somebody else paying into your retirement. If you can buy rental properties, and have a renter pay your costs and mortgage (plus a little extra), you essentially had those tenants compile a pretty hefty retirement fund for you if you decide to liquidate. If you don’t, but the homes get paid off, you can just use that rental income as your retirement income. This allows you to use the actual equity as an emergency nest egg.