Hi. Today, we are going to talk about passive income ideas. These are all the ideas of things that you can do that will generate you passive income. Passive income is the money that you make through time without actively working for it. Maybe you did something a few months ago and that thing has been bringing you money every month without you being involved every day, that’s passive income.
This too like the others before, will also be a multipart series article. We will explore this topic of passive income ideas over many articles distributed through different parts. In today’s part, we will talk about investments as a passive income income idea. We will talk about all the investment ideas that you can use to make money with passively.
Investments passive income ideas.
Below are some of the investment opportunities you can use to make money passively with:
1. Dividend Stocks.
For those of you who have never invested in or bought stocks, let me explain what dividend stocks are. There all kinds of stocks. There stocks that will earn you money other than the principle investment value. On the other hand there are stocks that will not earn money other than the principle investment value. The stocks that earn money are the ones called dividend stocks. But now you re wondering where does this money come from.
Stocks are shares of a for-profit company. The company is making money. When this company makes money, the profits made are shared among all the investors with dividend stocks. This is where the money comes from.
Therefore, to make money with dividend stocks, go to stock markets of your choice like NYSE and find dividend stocks. Buy them and every quarterly you will get your cheque from your investment.
2. Index Funds & ETFs.
Index funds are a type of mutual funds that track a specific market index. For example S&P 500. The thing with these kinds of investments is that you do not have to worry about tracking a single company shares or stocks. You do not have to track or analyse each shares one by one. With index funds you just invest in this index fund. The index will make sure to match or mirror all the stocks that match with your desire. This way your risk is low and less work.
ETFs are Exchange-Traded Funds. It tracks an index just like the index fund, but it trades like a stock on an exchange. You can buy and sell ETFs at any point in time during trading hours.
3. Bonds.
Bonds are IOUs from governments and or companies. This is how they work. You buy bonds from governments or companies. They issue you with a bond, in other terms they agree to pay you at a later date at an interest. In short terms you are lending the government or the company money. In return, the government or business will pay you back the money later at an interest. Pay attention to the interest part. The interest is where you earn money. The interest is what makes you earn money through buying bonds.
Lets say for example, the bond issuer, floats a bond of 18% interest rate. This means that when you loan them your money, at the maturity date, the bond issuer will pay back your money with an extra 18% interest. For example, if you loan a government 1 billion dollars for an 18% interest rate Bond maturing after 5 years. This means that after 5 years, the government will pay you 1 billion dollars plus 180 million dollars as the interest. Hence you will make easy 180 million dollars just for loaning out your money.
4. REITs (Real Estate Investment Trusts).
Real estate is a great investment. Real estate is always increasing in value. However, the real estate investment we are talking about here is not the same as what you are used to. We are talking about REITs. These are Real Estate Investment Trusts. This means that you invest in a real estate fund. Meaning that you do not get to own the property but you get to invest in real estate. You get to make money from the real estate investments without the stress of owning and management.
5. High-Yield Savings Accounts or CDs.
I know you might have had a bank account for years but you have never known there are different kinds of bank accounts. Yes there are so many different kinds of bank accounts that you can have. There are savings accounts, current accounts and more. However, in this point, we are going to focus on one type of account that can help you make money. That is high-yield savings account.
This is a savings account that allows you to earn from the money that you save in the account. But i know you are wondering how does that work? Let me explain in as few words as possible. When you save money in a bank especially in a savings account, the bank uses that money you have saved to make more money. They do this by lending your money to people taking loans from the bank. When the people who took loans pay back with the interest, the banks make money and thus they pay you.
The lower side of this passive income is that it has low returns. However, the risk is very low.
6. Peer-to-Peer Lending.
Peer-to-Peer lending is whereby you loan your friends, family and other people you know money that they will pay you later at an interest. Usually for peer-to-Peer lending, the interest rates are very high. The people lending out this money charge a very high rate for the loans. This is unlike banks whose interest rates are low and reasonable. With peer-to-peer lending, believe me the interest rates are unreasonable. This is because the risks are high. As you know the greater the risk, the greater the reward. This is how the lenders make money. The risk is high because the debtor could fail to pay back the money. However, the interest rates are very high to cover for the risks. Thus when you loan someone money, they pay it back at a very high interest rate.
7. Crypto Staking.
This is form of investment whereby you make money for buying and holding certain cryptocurrencies. The way this works is you buy and lock the cryptocurrencies. In other words you buy and hold the cryptocurrency. By holding the crypto, you are supporting the blockchain network. For that, you will be paid in rewards for the locking.
8. Robo-Advisors.
This is making money by investment through automated platforms. For example platforms like Betterment or Wealthfront will do the automated investment for you. This process does not involve humans even you. You just load your money and set your level of risk then let the machines do their work. The automated systems will analyze the investments that can make you money with low risk and invest for you. If the investment goes well you get to make money from the investment.
Note that this investment method has risks involved. These are automated systems gambling with your money. Thus you should be prepared psychologically that anything could happen. You could win or loose. So be prepared psychologically.
Conclusion.
This marks the end of the first part of this multipart series about Passive Income Ideas – Investments. Come back tomorrow for part 2 of this multipart series.
