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9 Best Investments for Passive Income

4 min read

For a lot of investors, passive income is the dream. To earn income without having to make a move, this is passive income. There are many ways to earn passive income, from making the right stock market investments to real estate properties and side hustles.

A person does not need to be a full-time entrepreneur or interested in what’s happening daily in the stock market to grow their money. While some investments take time to pay off for passive income to work, and while it’s not always easy to secure, opportunities exist.

Here are the best investments for passive income.

1. Dividend Stocks

An easy way for an experienced investor to make passive income is via dividend stocks. These stocks distribute part of a company’s earnings to investors, typically every quarter.

Many dividend stocks increase their payouts over time; if you select right, this type of stock has low volatility. You can reinvest dividends into your stock portfolio or withdraw it and have it dropped right into your bank account.

2. Dividend Index Funds and ETFs

Another type of dividend stock is index funds, exchange-traded funds (ETFs), and similar collections of funds. This type of stock allows you to take a hands-off approach to investing.

You put your money in a diverse group of stocks in a single mutual fund. They often offer a well-rounded selection of stocks, and those that provide dividends make for the passive income you can count on.

3. High-Yield Savings Account

A high-yield savings account earns passive income through interest, although it is far less than dividend stocks, index funds, and ETFs. A savings account allows you to make deposits, let the money sit, and not worry about risk. They are insured.

You earn interest every month. Shop around to different financial institutions as interest rates vary for high-yield savings accounts, and some offer very attractive promotional rates for a limited time.

4. Become a Peer-to-Peer Lender

Online platforms allow you to earn income as a peer-to-peer lender. This puts you into the seat as a lender to others, matching you as an investor to individuals looking to borrow money. This carries a higher risk than investing in a savings account or mutual fund. However, this strategy can potentially earn more interest in the long term.

5. Investing In A Small Business

Become a silent partner in a small business. Invest in a private business with the right terms to pay you back with an added royalty or interest. If you back a small business that you believe has real potential to generate income and if you cut the right deal, this could be an amazing way to generate passive income.

That said, this type of passive income investment is really for high-net-worth individuals, and there is always the risk that you may not see a return.

6. Real Estate and Mortgages

Buying real estate and earning rental income provides a passive income if you hire someone to manage properly. A long-term rental, however, is a reliable source of income. With rentals, there are always risks, including maintenance costs, property tax bills, and unexpected costs that arise.

However, this investment has some risks. You may be putting yourself at unnecessary risk financially or cannot keep up with the risks of owning a second property or more properties for use as rentals. If risk is a concern, consider investing in mortgages instead. This is a much safer option for you to earn passive income.

7. Use Your Home for Short-Term Rentals

If you have invested equity in a home, you can earn passive income by renting a room. If there’s a basement or section of the house you can convert into a short-term rental space, if you don’t mind the visitors, this can be a way to provide passive income with very little upkeep or ongoing maintenance other than laundry and a little tidying up after each scheduled visit.

8. Real Estate Investment Trusts, or REITs

Another way to derive passive income from real estate, without buying and arranging property management, is REITs. These funds typically own commercial real estate, such as office buildings, retail spaces, and apartment buildings. They pay high dividends in exchange for your investment.

Some REITs are on public stock exchanges, while others are private. This is another path to diversify your holdings or investment portfolio while prioritizing passive income.

9. Create IP You Can Sell and Easily Duplicate

Create an intellectual property that you have full rights to. If you are a creative type, you may not mind the work of writing a how-to guidebook, developing online courses, making templates, designing websites for affiliate marketing, and the like.

For example, you can also become a content creator by starting a YouTube account. Any of these things can allow you to pursue a hobby or do something fun and seemingly earn income on the side that is somewhat passive by design.