How To Create Passive Income
How to Create Passive Income
You did everything right. You have a good-paying job, you provide for your family, you’re even saving for your future. But are you doing everything you can to set yourself (and those who you care about most) up financially? Have you thought about how efforts to create a passive income can be a game changer in the Game of Life?
Learn everything there is to know - from some of the creative ways to create passive income you might not have thought about before, to what it really means, to some unique opportunities out there for you.
What is Passive Income?
Passive income is a financial strategy that allows you to reap benefits from a one-time investment that results in a residual stream of constantly-generated income. When done right, passive income investment ideas can offer steady cash flow with minimal physical input or daily effort from you. Does making money while you sleep sound too good to be true?
The truth is, passive income can make that dream a reality. We’ll look in detail at some of the best ways to create passive income below. For now, you should be thinking about why and how this can be such a game-changer in your life. Freedom, time and security are the top three compelling reasons most people decide to look more into this creative alternative to a 9-to-5’er.
Ways to Create Passive Income
There are dozens of ways to create passive income. Some may take a little more time and know how to get up and running (for example, running a successful YouTube Channel, creating an app. writing an eBook, etc.), but there are tons of ways you can get passive income stream returns with just a small upfront investment (be it financial or actual, physical, “grunt” work).
Let’s look at some of the top passive income investment opportunities available. We’ll cover what they actually mean and show you the risk level of each so you’ll know exactly what you’re getting into before you commit.
***RISK RATING IS ON A SCALE OF 1-10; 1 BEING THE LEAST RISKY AND 10 BEING THE MOST***
Private Equity Investing
Private equity investing allows you to invest in a private equity firm that’s managed by experts in the industry. They’ll find and present opportunities for you to invest in successful businesses, and in the best-case scenario, they’re able to maximize revenue for you by selling investments at a profit.
While a private equity venture can show a great success, you will assume some risk. A good portion of the risk involved stems from a lack of industry regulation and fairly minimal oversight in comparison with investing in direct stock ownership or index funds. That said, private equity investing can generate substantially higher returns than some other stock investments. Another drawback is high asset management fees and a high percentage (an average of 20 percent!) charged on profits returned.
***RISK LEVEL: 5***
Money Market Funds
With the feds slashing rates to virtually nothing in 2020, money markets currently return a very (very!) small amount on your investment. In the past, a 4 percent return yield could be well worth your money. Now it would take an exorbitant amount of capital for you to really make your money work for you through a money market.
On the upside, there is no minimum requirement to open a money market account, so it might be a good option for you if you’re just getting started. Additionally, your investment is safe and the commitment is flexible. You can access your money any time, should you need to. Ultimately, this type of passive income stream may be beneficial depending on your goal and comfort level of risk.
***RISK LEVEL: 1***
Create Your Own Product/Service
If you have a good idea, a proven market and a skill set that would allow you to develop, manufacture and distribute your creation, creating your own product or service could be an excellent source of passive income. But keep in mind, while the setup itself could be low risk, if you need to invest in development or manufacturing, that risk could increase substantially.
Some of the most difficult parts of creating your own product or service with the goal of achieving a lucrative passive income stream includes knowing how to market yourself, how to reach your audience and how to navigate the often-complicated process of distribution. But if it works, once your plan is in motion, you might realize huge success.
***RISK LEVEL: 1***
Real Estate Rental Property
Real estate is probably the most well-known way to earn passive income. A huge appeal to going this route is the fact that you can take your time looking for an investment that fits your budget and your comfort-level in terms of risk. Rental property and Real Estate Investment Trusts (REITs) are two of the paths you can take.
A big draw to using real estate as a source of a passive income stream is the fact that it doesn’t rely on or necessarily reflect fluctuations in the stock market. While you can lose on a real estate investment, more commonly, value retention is both possible and likely.
***RISK LEVEL: 3***
High Yield Savings Accounts
If you’re looking for the set-it-and-forget-it type of investment, high yield savings accounts could be exactly what you’ve been searching for. Like a money market fund, the cash you park in a high-yield savings account will literally sit and earn money for as long as you leave it there.
The benefit to choosing a high-yield savings account is the security you get, as they’re FDIC insured (money markets can be FDIC insured as well, but you need to check to make sure since not all are). A high-yield savings account obviously works best in times when interest rates are high, so be sure you evaluate how much you’ll actually earn on your money.
***RISK LEVEL: 1***
Dividend Index Funds & Exchange Traded Funds
The upside to dividend investing is it’s a time-honored way that a lot people achieve pretty successful passive income. That said, there’s a decent amount of research you’ll need to do to find stocks that offer you the best return on your money.
You’ll usually want to invest a hefty sum of money, and of course, you need to be willing to lose it, as there’s no guarantee when you’re trading in the stock market. The “Dividend Aristocrats” can be a helpful guide when choosing who you’ll bet on. This list of top-rated companies have proven consistent performance and have offered increasing dividend payouts usually over the last decade.
***RISK LEVEL: 4***
Real Estate Crowdfunding
Hailed by investors around the globe, passive real estate investing through crowdfunding lets you invest in part of a larger real estate project, making commercial real estate more accessible and obtainable even if you’re just a “regular” investor. Real estate crowdsourcing gives you the opportunity to invest in often large-scale projects and see an annual return.
A unique aspect to real estate crowdfunding is the fact that unlike a lot of passive income opportunities, real estate crowdsourcing opportunities might offer a physical asset in return for your investment. As a shareholder of a property, crowdfunding can provide you a steady return on the profits a property sees. In terms of risk, remember that projects could be shut down if they’re not fully funded or for a variety of other reasons. Though most often, initial investors’ money would be safe even if this does happen.
***RISK LEVEL: 3***
Connect Invest Investment Opportunities
Are you looking for ways to create a passive income stream that’ll let you make money in your sleep? Connect Invest offers high-yield online real estate investments with low minimum investments. Learn more about the investment listings and opportunities we have for you to take advantage of.
Ready to learn how it works? Come see first hand how you can earn a monthly income in return for your investment dollars with Connect Invest.