Commercial banks stay operational by lending at higher rates and letting customers save at dirt cheap rates. But have you seen those rates on savings accounts? They make Treasury bonds look like they’re giving cash away. There are many exchange traded funds (ETFs) that may be a better way to earn income.
Moolanomy for U.S. News & World Report enumerates the three ways commercial banks are ripping people off. [Dividend Paying ETFs: Where to Look.]
- First, most commercial bank savings accounts are only paying 0.10% interest. Higher yielding CDs offer around 1.5% per year. [ETFs to Look At In a Low-Yield World.]
- Secondly, banks also include monthly fees, such as fees for not maintaining an account minimum and now withdrawal fees for taking out your own money.
- Lastly, some banks are even including stipulations that prevent accounts from accruing interest. For instance, if an account is below minimum balance requirements, the account may not earn interest for the month.
There are a variety of ETFs in several asset classes that are delivering better yields without the harsh penalties that banks seem fond of these days:
- SPDR Dow Jones Industrial Average (NYSEArca: DIA) yields 2.45%
- SPDR S&P Dividend (NYSEArca: SDY) yields 3.44%
- iShares iBoxx $ High Yield Corporate Bond Fund (NYSEArca: HYG) yields 8.98%
- iShares S&P U.S. Preferred Stock Index (NYSEArca: PFF) yields 6.92%
- WisdomTree International LargeCap Dividend (NYSEArca: DOL) yields 8.4%
- Rydex S&P Equal Weight Utilities (NYSEArca: RYU) yields 3.9%
You can find dozens more ETFs that beat your savings account yield by going to the ETF Analyzer and sorting by yield!
For more information on fixed-income ETFs, visit our dividend ETFs category.
Read the disclaimer; Tom Lydon is a board member of Rydex|SGI.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.