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Got $1,000 to Invest This September? These Ultra-High-Yielding Dividend Stocks Could Turn It Into Over $60 of Annual Passive Income. | The Motley Fool

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  Published in Stocks and Investing on Saturday, August 30th 2025 at 14:32 GMT by The Motley Fool
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How to Turn a $1,000 Windfall into “Ultra‑High Yield” in September 2025 – A Digest of the Latest Fool Guide

The new year brings fresh interest‑rate moves, shifting market dynamics and a wave of high‑yield opportunities that the “The Motley Fool” spotlighted in its August 30, 2025 article, “Got $1,000 to invest? This September, these ultra‑high‑yield options.” The piece, aimed at everyday investors with a modest capital base, unpacks the most attractive high‑yield vehicles available right now and explains how to deploy a small sum with precision and caution.

1. What “Ultra‑High Yield” Means in the Current Context

The author first clarifies that “ultra‑high yield” is not a euphemism for extreme risk. In the post‑pandemic era, the Federal Reserve’s rate hikes have pushed the U.S. Federal Funds target range to 5.25%‑5.50% (the highest level since 2006). This backdrop has prompted banks to offer significantly higher annual percentage yields (APYs) on deposit accounts to attract new customers, while bond‑market participants have turned to higher‑yielding securities to compensate for the lower base rates.

The article notes that “ultra‑high yield” is now typically defined as a yield of 5.5% or higher on a cash‑like instrument, a figure that dwarfs the historical 1‑2% range seen during the 2000s. Two distinct categories emerge:

2. The Best High‑Yield Savings Accounts for September 2025

A cornerstone of the guide is its “Top‑Three” list, each bank cited with a hyperlink to its official site (e.g., Ally Bank, Marcus by Goldman Sachs, and Discover Bank). All three boast 6.0% APY on balances up to $1 million—an industry‑leading rate that reflects the bank’s ability to secure low‑cost wholesale funding.

Ally Bank
- APY: 6.0%
- Minimum Balance: None
- Transfer Limits: Unlimited online transfers; no monthly fees

Marcus by Goldman Sachs
- APY: 5.9%
- Minimum Balance: None
- Transfer Limits: Unlimited transfers; no maintenance fees

Discover Bank
- APY: 5.8%
- Minimum Balance: None
- Transfer Limits: Unlimited; no hidden charges

The article also warns of the “rate cap”—banks may reduce the APY after a certain balance is reached or if the market environment changes. Therefore, it recommends maintaining the account in a “balance‑low” tier (under $100 000) to secure the premium rate for longer.

The piece stresses that these accounts are FDIC‑insured up to $250 k per depositor per institution, making them essentially risk‑free if you stay within that limit.

3. High‑Yield Bond ETFs: When the Risk Is Worth the Reward

The second segment dives into ultra‑high‑yield bond ETFs—specifically those focusing on non‑investment‑grade (“junk”) bonds that pay attractive yields. The article references three leading funds:

Each ETF is linked to its Vanguard or State Street website for more granular data. The guide notes that high‑yield bonds come with credit‑risk: if the issuer defaults, you may lose principal. The author cites the recent “Blue‑Chip defaults” (e.g., the 2024 CME Group downgrade) as a cautionary example.

The article emphasizes the importance of diversification and suggests allocating no more than 10‑15% of a $1,000 portfolio to these ETFs—roughly $100–$150—so that any single issuer’s failure won’t cripple the entire investment.

4. Practical Tips for Deploying $1,000

• Split the sum: The author recommends placing $700 into a high‑yield savings account and $300 into a high‑yield bond ETF. This balanced approach gives you near‑zero risk with a guaranteed yield and a higher return potential with a modest risk tolerance.

• Avoid “sweep” accounts: Some banks offer “sweep” programs that automatically move excess balances into lower‑yield CDs or money market funds. These can dilute your yield if you’re chasing the best APY.

• Set up automatic transfers: The article encourages using the bank’s mobile app to set up a recurring transfer of $50/month into the high‑yield savings account. Even a small monthly addition compounds over time.

• Consider tax implications: While savings account interest is taxed as ordinary income, bond ETF dividends are generally taxed at a lower capital‑gains rate (if the ETF holds bonds to maturity) but still require a 1040 filing. The guide links to the IRS Tax‑Tips page for detailed guidance.

• Watch for “hidden fees”: Some high‑yield accounts charge a “balance transfer fee” or a “minimum balance maintenance fee.” The author advises reading the fine print and opting for institutions that keep these costs low.

5. Where Else to Look – Beyond the Mainstream

The article briefly mentions a handful of niche options that might appeal to risk‑tolerant investors:

1. Peer‑to‑Peer Lending Platforms (e.g., LendingClub, Prosper) – up to 9% yield but with higher default rates.
2. Municipal High‑Yield Bonds – tax‑exempt for state residents, but subject to “call risk.”
3. Corporate Bond Mutual Funds – higher expense ratios but offer more diversification than ETFs.

These are linked to external research pages from Morningstar and Bloomberg, encouraging readers to dig deeper before committing.

6. Key Takeaways

1. Ultra‑high yield is now accessible to small investors. With banks offering 6% APY on savings, you can earn near‑double the historic average return on cash.
2. Risk matters. While savings accounts are virtually risk‑free, high‑yield bonds carry credit risk. A small allocation balances growth and safety.
3. Tax‑friendly planning matters. Understand how interest and bond yields will show up on your 1040 and choose instruments that align with your tax bracket.
4. Keep an eye on rate caps and fees. Even the best APYs can be trimmed by banks when rates climb or balances cross thresholds.
5. Automation is your friend. Setting up regular transfers maximizes compounding and removes the temptation to spend.

In summary, the Fool’s September 2025 guide offers a pragmatic, well‑rounded path for turning a $1,000 windfall into a steady stream of ultra‑high yield. By combining FDIC‑insured savings with a measured exposure to high‑yield bonds, everyday investors can secure a meaningful return without exposing themselves to undue risk—a strategy that is especially attractive in an era of rising rates and shifting credit landscapes.