Savers Are Punished

Summary

• We live in an increasingly digital world that has given rise to many fintech companies that offer better yields than any banking instrument.
• Stablecoins seem to offer a great way to get into the cryptocurrency world for those who do not like volatility but wish to earn meaningful yield.
• GUSD is the Gemini stablecoin that currently sports a yield of 8.05%.

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While in theory it is always nice to be “fully invested” knowing that all your cash is working for you in some capacity, the reality is that most of us keep some cash on the sidelines. Of course, the question then comes up of what to do with this idle cash. Traditionally, you could always stick it in a savings account and earn an interest rate that kept pace or exceeded the inflation rate. Checking accounts also served as a secure way to store cash until needed. Of course, those were the realities of days long ago. In today’s world, to find real yield, we must enter higher-risk investment instruments to keep pace or exceed current inflation rates. As the title suggests, savers are punished. No longer can you park cash in any bank and receive real yield. Every bank instrument, even long-term CDs, have real negative interest rates. Safety and yield in U.S. treasuries perhaps? No chance. That’s another real negative interest rate.

Thankfully, we live in an increasingly digital world that has given rise to many fintech companies that offer better yields than any banking instrument. Companies like Fundrise allow individuals to invest in partial ownership of real estate across the country. Want to get into the lending business? There are many peer-to-peer lending platforms like Peerform that give individual investors the opportunity to lend cash for interest rates that greatly exceed bank interest rates. I know that over the years, many in our dividend growth community have pursued both of these strategies to diversify their passive income streams beyond dividends. Finally, we have the world of decentralized finance and cryptocurrencies that offer very high yields for USD-pegged stablecoins.

Recently, I read an article posted on Dividend Diplomats that highlighted Lanny’s Fundrise returns, to which he replied to my comment, “Any other ways where you generate passive income?” Enter the GUSD (GUSD-USD) stablecoin.

Stablecoins are cryptocurrencies that are backed 1:1 by a fiat currency or commodity. There are stablecoins backed by U.S. dollars, Japanese yen and even gold, for example. The beauty of stablecoins is that its daily rate does not fluctuate like other cryptocurrencies. A stablecoin backed by USD, for example, will always be valued at $1.

GUSD is the Gemini stablecoin that currently sports a yield of 8.05%. This yield can fluctuate but the beauty of a stablecoin is that it is highly liquid, stable, backed 1:1 by USD, earns interest daily (awesome for compounding effects) and is redeemable at any time. There are no locked-in time periods. Earning interest that compounds daily is what I do to earn extra passive income and park cash while waiting to deploy.

Stablecoins seem to offer a great way to get into the cryptocurrency world for those who do not like volatility but wish to earn meaningful yield. There are other platforms and stablecoins that offer double-digit yields. Of course, do your homework first. My personal experience with GUSD has been great, and seeing interest added to my balance daily is something no bank or bond can do. By parking cash in GUSD, I can feel a little better knowing that my monetary value is not melting away like an ice cube with each passing month.

What are you doing to earn extra passive income besides dividends? Please let me know below.

Disclosure: Long GUSD.

Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.