Janet Yellen: "Prepare for Negative Rates"

By Matthew Milner, on Wednesday, March 2, 2016

Your bank is robbing you.

Not content to simply insult you by offering pitiful interest rates, banks have actually started stealing from you:

Enough, we say.

Today we’ll show you how to fight back—and we’ll show you how to earn double-digit returns while you’re at it.

Negative Interest Rates in the U.S.

As you may have read in the news recently, banks from countries like Switzerland, Denmark and Japan have started offering their customers negative interest rates.

On average, these rates are about minus 0.5 percent.

By offering negative rates, banks are charging customers to lend them money.

The goal of this shocking strategy is to stimulate economic growth. The theory is that it should encourage investment.

This theory has yet to be proven effective, but that’s not stopping the U.S. from considering using it:

During two days of testimony last month, Janet Yellen, the chairwoman of the U.S. Federal Reserve, told Congress that she was exploring it.

What could this mean for you? Well, let’s look at a scenario where a dramatic new downturn compelled the Fed to reduce interest rates to minus 5%...

Over ten years, a retiree with $200,000 in savings would pay $100,000 in interest.

Take the Money and Run

Given the prospect of losing money by keeping it at the bank, you could withdraw your cash and invest it elsewhere—but where?

Certainly not in stocks: with the recent turbulence, you’d be putting your principal at risk.

Not in corporate bonds, either: Nestle, the Swiss food company, recently offered bonds with a negative yield (and despite that, people still bought them.)

And your money’s not even safe under your mattress: as Martin Sandbu recently wrote in the Financial Times, banks might try to prevent withdrawals by charging you the same negative interest rate on savings and withdrawals.

But enough about the problems.

Now let’s look at some solutions.

The Solution

Thankfully, recent innovations are creating new ways for you to protect and grow your savings.

For example, you could use the Internet to loan money to others. This is called “Peer-to-Peer Lending,” or “P2P” Lending for short.

It’s similar to equity crowdfunding—where you invest in private companies and receive a stake of the business in return—but with P2P Lending, regular people like you pool your capital together and lend it to others.

There’s no traditional bank involved. And by cutting out the middleman, borrowers pay less, and lenders get higher yields.

Let’s explore some of these options now.

The Dominant P2P Lender

The dominant P2P site is called Lending Club [NYSE: LC]. It’s for personal loans.

As of February 2016, LC has facilitated more than $16 billion in loans. According to its most recent statistics, lenders like you have earned average returns of 5% to 8%. (“Grade A” loans have returned 5.24%, and “Grade C” loans have returned 8.24%.)

99% of investors who invest in at least 100 loans have experienced positive returns.

Or Lend to a Business

Or perhaps you’d be more comfortable lending your money to a business…

At a site called Funding Circle, you can loan money to small and medium sized businesses. Average returns have been about 5.7%.

And at ApplePie Capital, you can lend money to brand-name franchises like Einstein Bagels. Projected annual returns are 7% to 12%.

Crowdfunding for Real Estate

On certain specialized websites, folks like you can even get access to high-yielding private real estate deals.

Financially, these opportunities can be more appealing than publicly-traded REITs, and they can be far less messy than investing in real estate directly.

Minimum investments are as low as $1,000, and cash yields (generally paid monthly or quarterly) range from 8% to 15%.

All these benefits might help explain why private real estate investing has quickly turned into a massive industry: last year, investors like you put an estimated $2.5 billion into these deals.

In the U.S. alone, there are an estimated 80 to 100 sites that focus on real estate investments. Some focus on residential properties, others on commercial deals, and still others on quick “flips” or international opportunities.

Here is a small sample of these sites:

Residential Real Estate

One of the most popular sites for residential investments is Realty Mogul.

Since the projects listed are usually single or multi-family homes, investment minimums are relatively low, sometimes just a few thousand dollars.

Commercial Real Estate

If you’re looking to get involved in bigger projects, check out the commercial real estate funding platforms.

These platforms include RealCrowd, as well as Prodigy Network, which has raised more than $300 million from thousands of investors.

Specialized Real Estate

Other platforms focus on more specialized investments.

For instance, Fund That Flip provides short-term financing to renovate and sell (i.e. “flip”) residential real estate.

AlphaFlow is like a private mutual fund for real estate: rather than visiting dozens of funding platforms and vetting hundreds of different real estate projects, you can write one check and let the fund manager do all the work. It targets 9% annual net returns.

As opposed to AlphaFlow, which is for “accredited” investors only (at least $1 million net worth, or $200k in income), Fundrise offers a private real estate fund for all investors. The minimum investment is just $1,000, and its target annual return is 15%.

Say “Bye” to Your Bank

Whether you’re concerned about negative interest rates, or just low interest rates, it’s time for you to understand your investment options.

Doing nothing means you’re putting your savings at risk.

Check out the businesses we’ve highlighted today:

All of them offer far higher interest rates than your bank—and maybe your investments in them will even stimulate the economy.

Best Regards,
Matthew Milner
Matthew Milner


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