5 Ways to Earn a Passive Income Through Investing
In today’s day and age, more and more people are looking for ways to earn a passive income through investing. Here are some of the most popular and profitable options out there.
Stocks and Bonds
When you buy stock in something, you are buying equity, you are buying a part of something; whereas, when you buy a bond you are buying debt and becoming a creditor to the company. Understanding the distinction between the two is important, as it is the distinctions that make the differences in the results they each tend to attain.
- Generally stocks have a higher return in the long run
- Some provide the option of being paid dividends.
- Some bonds can provide a sort of income stability
- Bond prices change much less dramatically when compared to stock prices
- There is no guaranteed return
- Prices change dramatically
- Generally bonds have a lower return in the long-run
- Prices fall as interest rates rise
Unlike a lot of other forms of passive income, making an income off of real estate can be done in a number of ways. One popular way is to rent out a piece of property. This can be a great way of earning a passive income, not only does the tenant pay down your mortgage on the property, but it allows you to still own it and therefore continues to build your equity. With property management companies like OneRent, professionals are able to help you with the day to day tasks like finding tenants, collecting rent, and handling any complaints as well. Like with every investment, there are both positives and negatives to renting your property out, however, it has proven to be a worth-while and profitable investment overall. Pros and Cons of Rental Properties
- Tax breaks
- The property remains yours and continues to help build your equity
- If you are unaware of how to find tenants, and do not have the right people helping you it can be difficult to rent a property.
- As with owning any house, there are expenses that come up in regard to maintenance and up keep.
Investing in Startups
In the last couple decades, investing in startups and new companies has become more, and more popular. Angel investing is one of the more popular ways for individuals to invest their own funds in an equity financing or a convertible note. Crowdfunding is increasing in popularity in the past few years, especiially with many online platforms facilitating the investment process for individuals who maybe only want to put in $5,000-$10,000.
- The opportunity to gain part ownership in a (hopefully) highly successful startup company
- The chance to support an idea that you are passionate about
- The risk that the startup might fail
A Real Estate Investment Trust (REIT) is a company that works to produce income earning real estate. It allows investors to make a strong passive income over time, and has grown to impact many areas of the economy. Investing in REITs
- Being able to own real estate without having to worry about the day to day upkeep
- These are a great way to diversify your investment portfolio.
- Profitability decreases as interest rates rise
- Decreases in property values, and occupancy rates impact the profitability
Peer-to-peer lending is an increasingly popular idea that has only continued to grow as technology has become more and more dominant in our lives. Today, most peer-to-peer lending happens online through companies and programs that set up people looking for a loan (borrower), whether it be personal, or business, with a suitable lender (investor). These loans are paid back on a monthly basis and the investor makes back the principle plus interest. Peer-to-Peer Investing
- As of April 2014 Peer-to-Peer Lending is now covered by the FCA Regulation
- You will make more in interest than a normal savings account would get you
- Your Taxes will not be deducted, meaning that you have to declare any income earned through interest
Leave a comment letting us know what combination of these methods you use!