5 ways to escape low interest rates

Taking control of my own money has changed my perspective on the way to invest. I can appreciate many people are concerned about risking their money on financial markets but it’s worth it, especially if you’ve got long-term financial goals.

Today I looked at the rates currently being offered on term deposits at the big banks and cannot imagine how anyone could invest a substantial amount of money at the rates they advertise and expect to become wealthy.

There are so many alternative investments available which offer twice as much income and will likely grow at a much faster rate.

It might just be me (I consider myself to be a somewhat ‘high-risk’ investor), but if your investment timeframe is more than five years, why not take on the extra risk and possibly double, triple or quadruple your money? Of course there’s no guarantees, but as opined by Robert G. Allen: “How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case.”

An alternative

So with interest rates stuck at 2.5%, why not make some calculated high-yielding investments this year? Here’s five stock ideas to get you started.

Firstly, many investors cannot resist the allure of Telstra Corporation Ltd (ASX: TLS) as a dividend play when interest rates nose dive. Recently its share price rocketed upwards but, in my opinion, Telstra’s commanding dominance in local telecommunications markets and interests overseas will result in it being able to pay (and likely increase) its dividend for many years to come. It currently yields 5.4% fully franked.

Health insurance provider NIB Holdings Limited (ASX: NHF) might not offer the dividend yield of Telstra, but it makes up for it with solid growth prospects. Australians remain under-insured and this renders NIB with plenty of organic growth opportunities. It has a current dividend yield of 4% fully franked.

Three retail stocks which not only provide great growth prospects but pay fantastic dividend yields are Cash Converters International Ltd (ASX: CCV), RCG Corporation Ltd (ASX: RCG) and Premier Investments Limited (ASX: PMV) – Premier investments operates brands such as Just Jeans, Jay Jays, Dotti, Portmans, Jacqui E, Peter Alexander and Smiggle. Respectively, they offer fully franked dividend yields of 4.4%, 5.1% and 5.1%.

Foolish takeaway

Investing in established and stable businesses is the best way to growth your wealth in the long term. Investors fleeing from term deposits, thus taking on more risk than they are familiar with, shouldn’t be surprised if stock prices fall. Because they will. So long as the company’s fundamentals remain the same and you have the mental grit to look past short-term fluctuations, the market has proven it will reward you in the long run. All the while you can rest easy, knowing you’re receiving a market-beating dividend yield.

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Motley Fool Contributor Owen Raszkiewicz owns shares in NIB Holdings, RCG Corporation and Cash Converters. 

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