If you have $3 million to invest, you can safely and reliably earn anywhere from $3,000 to much as $82,500 a year in interest. If you are ready take more risk, you may earn more. But risk also means the possibility of lower returns or even losses. You can find a financial advisor to help you manage risk and get the most interest income from your $3 million.
How Much Interest $3 million Earns on Different Investments
Generally speaking, the higher the return an investment offers, the greater the risk. Investments also differ in terms of liquidity, or how easily and quickly an investor can turn the investment into cash. Here are eight common choices:
- Savings account. A savings account at a bank or credit union pays from 0.01% to 1% per year. At those rates, $3 million would earn from $3,000 to $30,000 in interest per year. Bank deposits are highly liquid and insured against loss by the Federal Deposit Insurance Corporation (FDIC), while the National Credit Union Administration (NCUA) insures credit union deposits. However, each account is only insured up to $250,000. So to invest the entire $3 million you would have to use several different financial institutions. You can identify top-earning savings accounts using SmartAsset’s online savings account comparison tool.
- Money market account. Rates for these bank and credit union accounts currently range from about 0.6% to 1%, so $3 million could earn from $18,000 to $30,000 per year. Money market accounts are insured like savings accounts, but may pay more interest while also providing high liquidity and the ability to write checks and use other services.
- Money market funds. Money market funds are currently paying seven-day yields of about 0.5%, so a $3 million investment would earn about $15,000 a year. You can buy money market funds at many banks but they are not insured against loss, although they are considered safe, conservative and liquid investments.
- Certificates of deposit (CDs). These currently pay from 0.8% to 2.75% depending on maturity, which can range from 28 days to 10 years. This means a $3 million investment in CDs could earn from $24,000 to $82,500. Longer maturities pay the higher rates of interest. A jumbo CD that pays a somewhat higher interest rate is available for savers ready to deposit at least $100,000. CDs are less liquid than other insured deposits. If you withdraw your money early you may be charged a penalty.
- Treasury securities. Bonds, notes and bills issued by the U.S. government are safe and pay interest every six months. They come in various maturities, allowing investors to purchase bonds that fit their time frames. Longer maturities pay higher rates. Mutual funds that invest in government securities provide greater flexibility, liquidity and diversity. However, government bonds are subject to price declines and most bonds and bond funds have produced negative total returns during the current cycle of inflation and rising interest rates. For instance, as of the end of the first quarter of 2022 shares in Vanguard Short-Term Federal Funds posted a one-year total return of negative 3.27%. This means an investment of $3 million would have lost $98,100.
- Series I savings bonds. These U.S. Treasury securities are currently paying 9.62% annually, one of the highest yields available. Their government backing also makes them very safe. Investors can only buy a maximum of $10,000 of Series I bonds a year, plus another $5,000 worth if using a tax refund. An investment of $15,000 at 9.62% produces $1,443 in interest. However, you’ll have to put the rest of the $3 million to work elsewhere for the time being.
- Corporate bonds. While less safe than Treasury securities, debt obligations from major corporations also tend to pay higher interest. Corporate bond interest rates vary widely depending on the stability of the issuer. Price for corporate bonds fluctuate, so total return including interest and value of the bonds is a key factor. Corporate bond funds offer diversified baskets of bonds from many different issuers than can help manage risk and improve return. However, as of mid-2022 the Bloomberg Global Aggregate Corporate Total Return Index has posted a one-year return of negative 9.62%, equal to a loss of $288,600 on a $3 million investment.
- Municipal bonds. These debt instruments are issued by local governments to raise money to build roads and fund other improvements. While not as safe as Treasury securities, municipal bonds are free from federal income taxes and, often, state and local income taxes as well. Municipal bond funds let investors easily buy and sell diversified baskets of municipal bonds. The S&P Municipal Bond Index in mid-2022 had lost approximately 7.54% during the previous year, equal to a decline of $226,200 in the value of a $3-million investment.
An investor with $3 million can earn from ranging from ordinary savings accounts to government-issued Series savings bonds. The rate of interest, safety and liquidity offered by these different investments differ widely.
Investing Tips for Beginners
- Consult a professional to meet your specific goals. A financial advisor can help you determine the best portfolio for your personal situation. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you.
- Build a strong financial foundation. Before investing, most advisors recommends that you pay off any high-interest debt you owe. At the same time, consider creating an emergency fund to allow you to cover unexpected expenses without dipping into your investment portfolio.
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