Are you looking for an investment that pays monthly? You’re not alone. Inflation is biting, and seeking a way to get a reasonably quick return on your parked money makes sense.
Luckily, there are several assets you can invest in that will provide a monthly return. Most of them are easy to set up and offer reasonable returns. This article reveals what they are, the returns they generate, and more.
- The Best Investments That Pay Monthly (Overview)
- An Overview of Investments That Pay Monthly
- The Best Investments That Pay Monthly At a Glance
- Features to Look for In An Investment That Pays Monthly
- Best Investments That Pay Monthly: Our Top 3 Options [Ranked & Reviewed]
- Notable Mentions: Other Investments That Pay Monthly to Check Out
- Other Options Relevant to Investments That Pay Monthly
- Frequently Asked Questions
- Wrapping Up
The Best Investments That Pay Monthly (Overview)
We’ve included an overview of our top picks below. For detailed information on each pick, scroll down.
- High-Yield Savings Account – Our Pick
- A Business – Runner-Up
- Rental Real Estate – Also Great
- Exchange Traded Funds – Best for Diversification
- Bonds – Most Liquid Investment
- REITs – Best Alternative to Direct Investments in Real Estate
- Dividend-Paying Stocks – Best Alternative to Stocks
- Money Market Funds – Best Short-Term Investment
- Annuities – Best for Retirement
An Overview of Investments That Pay Monthly
What Is an Investment That Pays Monthly?
An investment that pays monthly is any asset that produces returns every month after you put your money into it. The asset can be tangible (like property) or intangible (for example, stock ownership). The investment may require minimal amounts of capital or a substantial upfront investment.
Why Are Investments That Pay Monthly Important?
Monthly-paying investments are essential because they provide extra income. Many investment vehicles involve tying your money down for months or years.
However, unlike saving, the point of not spending the money you invest is to earn a return on it.
Do I Need an Investment That Pays Monthly?
If you plan to grow your net worth, you need to invest in an asset that pays you every month. These investments provide greater flexibility because they provide returns quickly, letting you invest in more assets that grow your net worth.
The Best Investments That Pay Monthly At a Glance
Here’s a quick snapshot of the best monthly investments and explanations of why they top our list:
What Is the Best Investment That Pays Monthly?
High-yield savings accounts are the best investments that pay monthly.
This investment vehicle is easily accessible, low-cost, low-risk, and government-backed. You can open an account without putting a nickel down and invest at your chosen pace.
What Is the Investment with the Highest Return?
Investing in a personally-owned business provides the highest return. Your earning potential is practically infinite when you go this route.
Features to Look for In An Investment That Pays Monthly
When choosing an investment method, make sure you consider the following factors:
1. Expected Returns
An investment’s expected return is the first feature to look for before putting your money down.
You want to be satisfied that you’ll generate a healthy return on the money you initially invested. What constitutes a reasonable return will depend on the investment vehicle and economic factors.
How easy is it to sell your investment asset for liquid cash? Knowing the answer will make you feel confident that you can divest when you need to raise cash quickly. Some investment vehicles, like property, are much harder to liquidate than others.
Paying attention to an investment’s risk level lets you know how quickly your asset can lose value during tough economic times. Also, since riskier investments tend to pay higher returns, you can expect to earn more when times are good.
4. Required Capital
Some investment methods require huge amounts of capital to jump-start. Depending on your financial situation, an investment’s required capital may be an impediment. Where that’s the case, you’ll have to choose a less capital-intensive investment asset.
Some investments (like real estate) will always provide a steady income stream, regardless of the economic outlook. You’ll want to prioritize these investment types if you have a low-risk tolerance.
Best Investments That Pay Monthly: Our Top 3 Options [Ranked & Reviewed]
High-Yield Savings Account – Our Pick
A high-yield savings account is an account that provides a significantly higher rate of interest than traditional savings accounts.
Although commercial banks also offer these financial products, online banking institutions are the primary source. Customers typically opt for them because of the convenience and return they provide.
Monthly income investments don’t come easier than high-yield savings accounts. They’re an excellent short-term investment because you can always access your money.
In addition, these accounts don’t require high initial deposits. You can open a high-yield savings account with next to no money and fund the account as you’re able.
Another factor that makes these accounts one of the best monthly income investments is how you can earn passively. They require little to no work before you can begin generating interest income.
Once you deposit some money in the account, it’ll go to work for you in the background.
Key Features of High-Yield Savings Accounts
- Higher-Than-Average Interest Rates: These bank accounts offer higher interest rates than traditional ones.
- Minimum Initial Deposit: Low minimum deposits typically associated with these accounts are low (if at all).
- Minimum Balance: Many high-yield savings account providers don’t impose minimum balances.
- No ATM Card: To encourage saving, these accounts don’t include ATM cards.
- No Monthly Fee: Many banks don’t charge monthly fees on high-yield savings accounts.
Pros of High-Yield Savings Accounts
- Accessible: Almost anyone can open a high-yield savings account.
- Low-Risk: High-yield savings accounts are among the safest ways to get a return on your money.
- Government Insured Money: If you have up to $250,000 in your bank account, the government will insure your money, entitling you to compensation should your bank fail.
Cons of High-Yield Savings Accounts
- No Protection from Inflation: High-yield savings accounts don’t offer protection from inflation.
- The Return Isn’t Substantial: High-yield savings accounts offer returns proportional to their risk exposure (low risk, low reward).
- Limited Transfers and Withdrawals: Some banks limit the monthly withdrawals and transfers you can make.
High-Yield Savings Account Income
High-yield savings accounts typically earn ten times the interest a traditional savings account offers. For example, CFG Bank offers an annual percentage yield (APY) that provides a 5.28% return on your savings. Bank of America offers a 0.01% APY on its savings account.
Our Take: Should You Choose a High-Yield Savings Account?
We recommend this investment method. High-yield savings accounts are one of the most accessible means of earning a monthly income from your parked money.
You can enter your local bank, open an account, and earn. Also, this passive income investment method is fantastic for investors with a low-risk tolerance.
A Business – Runner-Up
Starting a business is another excellent investment that can produce monthly income.
In the digital age, anyone with an internet connection and a computer can start one from home. And if they get their enterprise off the ground and fulfill other people’s needs, they can earn a significant monthly income.
As a business owner, you can either offer goods or services. The trick to succeeding is meeting an existing demand while keeping your costs and cash flow steady.
When you sell a specific number of goods or services every month, you can make a profit after addressing your expenses and taxes.
If you don’t want to go to the trouble of starting a business and have the money to spare, you can buy an existing one instead. Hire someone else to run it for you, and you have a semi-passive way to grow your investment portfolio.
Key Features of a Business
- Huge Returns: You can make a lot of money if you succeed at business.
- Financial Leverage: Unlike other investment methods, you can lend money to get your business up and running.
- Personal Satisfaction: Few other investment methods let you help others while making money.
- Better Knowledge: Business ownership teaches you many fiscal lessons.
- Social Status: A perk of being a business owner is the respect you command in your social circle.
Pros of a Business
- Complete Control: As a business owner, you’re in the driver’s seat regarding your financial destiny.
- Unlimited Earning Potential: There’s no fixed percentage of returns you can receive each month.
- Tax Incentives: Depending on your business’s structure, you can write off some income to lower your taxes.
Cons of A Business
- High Risk: Starting a business is among the riskiest ways to generate monthly income.
- Time Investment: Expect to invest time when starting a business. This method isn’t always the best way to earn passive income.
- No Immediate Gratification: Unlike other methods where interest payments are guaranteed, you may not turn a profit for a long time.
Depending on factors like demand, your product or service, your business costs, and your level of success, you can make hundreds, thousands, or even millions of dollars in revenue and profit.
Our Take: Should You Choose a Business?
If you want an investment method that provides a reliable monthly income as soon as possible, starting a business may not be for you.
However, if you want to take on some risk, consider going into business. You can reap the fantastic benefits that business ownership provides.
Rental Real Estate – Also Great
Rental real estate offers one of the most stable ways to receive monthly passive income payments. This investment method involves mortgaging a property, doing it up, and renting it out as a landlord.
It can be a monthly income because your tenant pays you monthly rent. You can then use that money to service your mortgage or invest in other ways.
One of the best qualities of investing in rentable properties is how passive it is. Once you find a property, make it habitable, and get a tenant, you can sit back and collect rent for years if not decades.
You’ll need a good amount of capital to put a down payment on the property. However, if you’ve maintained a decent credit rating, you shouldn’t have too many issues getting a mortgage.
Key Features of Rental Real Estate
- Passive Income Source: Once you have a paying tenant, you can passively collect a regular monthly income.
- Increases in Value: A rental property tends to appreciate over time, providing a healthy profit when you’re ready to sell.
- Reliable Investment: Real estate is always in demand regardless of the economic outlook.
- Inflation-Resistant: Rental properties aren’t affected by inflation and will adjust accordingly to prevent diminishing your returns.
- Predictable Returns: Real estate assets offer predictable returns due to factors like the rent market rate in the property’s area.
Pros of Rental Real Estate
- Controllable Risk: As a landlord, you can manage risk by screening your tenants. In addition, you can take out rent default insurance.
- Service Other Debt: You can use the money you receive in rental income to service your mortgage payments.
- Tax Benefits: Real estate investments provide multiple ways to reduce taxes on the income earned from rent.
Cons of Rental Real Estate
- Capital-Intensive: Investing in real estate requires huge amounts of capital to start.
- Knowledge Required: You’ll need extensive research to choose the right locations to invest in.
- Low Liquidity: You can’t quickly liquidate real estate investments for cash, especially occupied properties.
Rental Real Estate Income
The amount of income you can make as a real estate investor depends on factors like your property’s location, size, and the current market rate of the rent in your area.
For example, if you have a property in Los Angeles, California, you can charge tenants $2,500+ to rent your studio apartment or two-bedroom flat.
Our Take: Should You Choose Rental Real Estate?
We highly recommend investing in rental real estate if you have the capital. This investment method is reliable, inflation-proof, and excellent for paying debt.
You can also leverage the rent payments to own the asset outright, and your property would’ve increased in value by the time you’re through with your mortgage payments.
Notable Mentions: Other Investments That Pay Monthly to Check Out
If the above three investment methods aren’t your cup of tea, consider trying one of the alternatives discussed below.
Exchange Traded Funds – Best for Diversification
An exchange-traded fund (ETF) is a managed investment fund that pools hundreds of stocks together. Becoming an investor is a low-risk way to work with the stock market, as the fund spreads the risk around multiple companies.
For example, if one company’s stock takes a hit, the other companies’ stocks cushion the impact of that company’s share fluctuations.
Why Is an Exchange Traded Fund a Great Option?
You can diversify your investments when you invest in an ETF. The stocks in the fund represent ownership of companies in diverse industries. In addition, this investment method is an excellent way for beginners to involve themselves in stock trading.
You’ll appreciate ETFs if you have analysis paralysis when choosing a company to invest in. These funds remove analysis from the equation by letting you invest in multiple companies simultaneously.
Drawbacks to Exchange Traded Funds
The main drawback to ETFs is the high fees involved with a managed fund.
Also, they’re not as liquid as traditional stock holdings, meaning you can’t sell off your ownership in an ETF should the need arise.
Finally, some ETFs focus on a single industry, making them a terrible choice from a diversification standpoint.
Exchange Traded Fund Income:
According to Investopedia, ETFs pay monthly dividends that range between 1% and 12% over a 12-month dividend yield period. Please note that the above isn’t the norm, as typical ETFs usually pay quarterly dividends.
Bonds – Most Liquid Investment
A bond is an asset class that resembles a loan. The difference is you can sell bonds to other investors whenever you please (that is, whether they’ve matured or not).
During that time, you’ll receive monthly interest payments until you get the principal amount back.
There are several bond types, two of the most common being corporate and government bonds. Bonds can also be short-term or long-term, with the latter paying better interest rates.
Why Is a Bond a Great Option?
Bonds provide a fixed income that can weather economic fluctuations. Additionally, you can elect to invest in a bond fund like an ETF or mutual fund. When you do, you can diversify your portfolio and spread your risk.
Meanwhile, government bonds are guaranteed, meaning you don’t have to worry about losing your investment.
Drawbacks to Bonds
Although they provide a decent return, long-term bonds are more susceptible to interest rate fluctuations than short-term bonds. Bond prices tend to fall when interest rates are high and vice versa.
Currently, US interest rates are low, meaning bond prices are expensive.
Factors like the type of bond and its duration determine how much you can earn from bonds. For example, at the time of writing, a 1-month US treasury yields 5.23%.
REITs – Best Alternative to Direct Investments in Real Estate
REITs (or Real Estate Investment Trusts) are companies that invest in commercial real estate.
They’re similar to mutual funds and ETFs because they pool several investors’ capital together. You can invest in public or private REITs and buy into them like ETFs.
Please note that private REITs aren’t as liquid as their public counterparts. The implication is that they’re longer-term and attract penalties if you sell early.
Why Is a REIT a Great Option?
REITs are an affordable way to invest in the real estate market without buying and managing physical property. You can use them to earn the income you’ll put towards a future mortgage down payment.
Drawbacks to REITs
While REITs offer a decent income stream, they don’t offer capital appreciation due to their business model (which is to pay the bulk of their income back to investors).
Also, some REITs have high fees, the government taxes REITs as regular income, and they can be highly volatile.
According to Investopedia, the FTSE Nareit Equity REIT Index had a 10-year average annual return of 8.34% (as of June 2022).
You can expect a similar return on your capital. Investors use the above index to gauge the US real estate market’s health.
Dividend-Paying Stocks – Best Alternative to Traditional Stocks
Dividend-paying stock investment entails investing in companies that pay yearly or monthly dividend stocks. This investment method contrasts with buying and holding high-growth stocks to sell in the future.
In addition, dividend-paying stocks are less risky than high-growth ones, though they still have considerable risk.
Companies that pay dividends regularly tend to be mature (think The Hershey Company).
Why Is a Dividend-Paying Stock a Great Option?
Investing in dividend-paying stocks offers plenty of flexibility. For example, you can spread your risk by investing in an ETF that holds dividend-paying company stocks.
Also, you can create a steady income stream by investing in multiple companies that pay dividends in different months of the year.
Drawbacks to Dividend-Paying Stocks
Like all assets tied to the stock market, these stocks tend to fluctuate in value. Also, they don’t offer the massive gains stocks in high-growth companies provide.
These investments are stocks in “boring” and reliable companies, which means you won’t derive the same excitement investing in a disruptive company brings.
Dividend-Paying Stock Income
You can expect a modest return on your dividend-paying stock holdings. The dividend yield you can earn will depend on the company’s policy.
Money Market Funds – Best Short-Term Investment
Money market funds (not to be confused with money market accounts) are much like ETFs and mutual funds. However, they invest in cash and cash equivalents as opposed to companies.
These funds are highly liquid and offer low risk, making them excellent for temporarily parking money destined for investment elsewhere.
A distinguishing feature of money market funds is their net asset value, which they try to maintain at a Dollar per share. When earnings are in excess, the fund’s managers regularly distribute these profits to shareholders.
Why Is a Money Market Fund a Great Option?
This investment method is excellent because it doesn’t lock your money in as others do (for example, real estate). You can invest in the fund, earn income, and then take your money out whenever the mood suits you.
Drawbacks to Money Market Funds
The downside to money market funds is they don’t offer capital appreciation. This disadvantage makes them unsuitable for investors who want to invest long-term. They’re low-risk and offer low returns.
Money Market Fund Income
The returns you can earn depend on the fund you invest in. For example, Vanguard Federal Money Market Fund offers a compound yield of 5.16 percent.
Annuities – Best for Retirement
Annuities are contracts between a customer and an insurance company. You receive monthly payments immediately or from a predetermined date in exchange for an upfront amount.
In addition, the payments can last for a specified time or the customer’s lifetime.
People typically buy annuities to supplement their retirement income, making this investment method excellent as a fallback when you run out of funds during retirement
Why Is an Annuity a Great Option?
An annuity provides a reliable and stable way to prepare for your retirement. If you run out of pension money, you can have the money from your annuity to fall back on.
Drawbacks to Annuities
While they provide a reliable income, the terms tend to be complicated, and the fees are enormous. As such, you’ll need to seek the counsel of a financial advisor when using this investment method.
The income you receive from an annuity is usually fixed and varies from contract to contract.
Other Options Relevant to Investments That Pay Monthly
The following are alternative ways to earn income monthly without investing money:
- How to Start an AirBnB Business: If you have a spare room in your existing home, you can use it for AirBnB.
- Retail Arbitrage: With a retail arbitrage business, you resell goods you buy in bulk from Walmart for a profit. It’s an affordable way to start a business.
- Make Money with Your Car: Do you own a car? You can use it to generate money every month by renting it out or becoming an Uber driver in your spare time.
All of the above businesses can help you earn monthly income, which you can funnel into investments later.
Frequently Asked Questions
Here are some frequently asked questions about investments that provide a monthly income:
How Can I Invest as a Beginner?
You can invest a portion of your existing income in a high-yield account. You don’t need to invest a huge amount of money. Even putting away a couple of dollars each month will be enough to get your money working for you.
Should I Choose One Investment Or Multiple?
It depends on how much you have to invest. It’s smarter to diversify your investments because diversification helps you to minimize your risk exposure.
High-yield savings accounts are the best monthly-paying investments by a wide margin.
Starting a business and investing in rental real estate are close seconds, but neither can compete with a high-yield account’s accessibility.
Anyone can open an account, whereas not everyone has the capital for rental real estate or the aptitude for running a business.
And high-yield accounts check all the boxes regarding investment considerations: they’re low-risk, offer a decent return, are highly liquid, don’t require huge amounts of capital, and offer reliability.
Of course, you may have your opinion. Regardless, the investment options discussed in the article are among the best ways to make a monthly return.
Have some thoughts about our guide? Leave them in the comments, and share the link with others looking for ways to invest.