A way to make your money work for you is to loan it out. It is too
much trouble to do this on a person-to-person basis, but there are new online
tools that simplify the process. Sometimes referred to as "peer-to-peer
lending" or "social network lending," loans are being made to complete
strangers at several websites.
Perhaps the best example of this at the moment is LendingClub.com. They
are also the only company I know of that is registered with the SEC
(Securities and Exchange Commission). Borrowing members have their
credit checked, provide all the details of their income and debts, and submit
a loan request. Investor members invest what they want into funding each
loan.
Lending club handles it all, including attempting collections if there are late
payments. The overall default rate was under 3% the last time I checked,
and since the auditing firm that reported that didn't break it down further, I
suspect that the default rate for the "A" and "B" rated loans is closer to half
of that.
You technically don't loan directly, but buy "notes" that are a part of the
total loan. You can buy a $100 (4 notes) of a $9,000 loan if you want, or
even as little as $25 at the moment (1 note). This system allows you to start
with a few hundred dollars and still spread the risk around.
A portfolio of $5,000 might be spread among 100 different loans, and yield
11% or more even after the 1% fee lenders pay. Even if 3% of the loans
defaulted that would mean a decent return compared to anything banks are
offering. My wife and I are just trying this right now, so I can't tell you what
are results are yet, and you'll have to do your own investigating before you
invest.