As Matt explained yesterday, we’re doing something special over the next couple of weeks:
We’re showing you how to stay sane during this extreme market volatility…
While at the same time, showing you how to increase your overall returns!
It’s all thanks to a new project we’re calling The Private Portfolio Makeover.
Yesterday, Matt showed you how to take advantage of this “makeover” with private startups.
But today, I’ll reveal how to take advantage of it with a different type of investment…
More Than Just Startups
You see, the private markets are about more than just startups.
In fact, there’s a private market for almost every traditional asset class out there.
So today I’ll focus on the private market for the largest asset class in the world: Bonds.
That might sound surprising — after all, when you read financial headlines, you usually read about stocks. But while the stock market is worth roughly $34 trillion…
The bond market is worth a staggering $100 trillion.
Banks and big institutions use the bond market to earn consistent returns. And as an individual investor, you should keep a portion of your money there as well.
But as you’ll see in a moment, there’s a better way to invest in bonds than going the “traditional” route…
Better Than Bonds
The bond market can add stability to your portfolio. But the returns there are pitiful…
At the moment, the yield on a 30-year government bond is just 1.48%. So after you take inflation into account, you’re basically losing money.
Corporate bonds aren’t much better: the average corporate bond yield right now is just 2.75%.
But by replacing a portion of your bond portfolio with private bonds, you could earn returns that are much higher.
For example, here’s a chart that shows Private Market returns (in red) versus Public Market returns (in blue):
And as you can see in the middle part of the chart, private bonds could help you earn yields as high as 10%.
That’s 363% more than you’d earn with corporate bonds, and 800% higher than what you’d get with government bonds!
Let me show you how it works.
Introducing: The Private Bond Market
In the public bond market, investors lend money to big corporations and governments.
But in the private bond market, people like us pool our capital and lend it to other people.
Borrowers use the capital, typically $15,000 to $25,000 in size, to pay down high-interest credit cards, or to make a big purchase like a new car.
By cutting out the bank as a middleman, borrowers can pay lower interest rates, and lenders like us can earn higher yields — sometimes north of 10%.
For example, Matt has been investing in private bonds for some time now, and the returns are far, far higher than you could earn in the public bond markets…
Here are the stubs from his returns:
As you can see, the income varies a little bit from month to month, but it’s been pretty close to $10,000 every month, which comes out to an annual yield of about 10%.
How You Can Get Started Today
There are a couple of well-known websites for private lending. For example:
Prosper — Prosper is one of the oldest private lending platforms. According to its website, it’s coordinated over $12 billion in loans to more than 770,000 people.
LendingClub — This private lending platform has been helping borrowers and investors for nearly 13 years. According to the company, the average interest rate across all the loans on its platform currently sits at a whopping 12.7%.
What’s The Catch?
But before you start investing in private bonds, you should be aware of the risks.
In particular, because you’ll be making loans to individuals, you need to manage your default risk. Meaning, you need to diversify across many, many loans… and only invest small amounts of money (like $25) into each one!
This way, if one or two loans don’t work out, you’ll still have plenty of others to balance out your returns.
And by the way, if earning 10% a year isn’t enough to get you excited about shifting some of your assets to the private markets…
Be sure to read Matt’s article in our “Private Portfolio Makeover” series next Wednesday…
He’ll be showing you another private cashflow generating investment…
And this one could hand you annual returns as high as 17%!
So stay tuned!