Passive income is an amazing way that can help you in generating extra cash flow for your responsibilities as well as to make you enjoy your life to the fullest. World has suffered a lot due to COVID and lockdown measures. Economies have seen devastating effects and personal income has also declined drastically. So, you assuredly need some passive income sources that can help you to cope up the current situation. Passive income is that bridge which will help you cover the sudden gap of unemployment and severe decline in incomes due to the pandemic. Earnings to meet your planned retirement goals can be another reason for having to build some extra wealth through passive income and this is a strategy that can surely appeal to you too, despite of the fact how much currently you are earning from your primary job. It is just an extra way to earn more money to be financially secured.
What is passive income?
Passive income is income earned from a source other than the employer or contractor. According to The Internal Revenue Service (IRS), passive income arises from two sources namely rental property and a business in which the person does not actively participate and just engages passively, likely being paid for book royalties or stock dividends. It does not mean that you do not need to participate and work at all; you just need to give work upfront. In practice, you may do some or all of the work upfront, but passive income often involves some additional labor along the way, too. You have to keep your products and investments updated as per the current scenarios and your rental properties maintained and intact to ensure the continuous flow of passive income in your bank accounts.
With the passive income that is also called as side income which in itself specifies that you can even ensure your passive income coming even if you may or may not pursue your primary job. Either of the situations is, a passive income gives you extra security and financial freedom.
If you’re thinking about when and how to create sources for your passive income, here we are! This article aims at providing you with top sources of passive income and to make you learn what it takes to be successful with them, while also being well acquainted with the risks associated with each source. Let’s begin.
Advertise on your car and renting
If you are someone who has a car sitting at home, you can make the best use of it to earn some extra money out of it. Basically, you could make some good money fast by doing nothing at all if you have a car sitting at home. All you need to do is either rent your car or start accepting advertisements to be hung on your car for the offered product’s promotion. Start renting your car when not at use. This is a win and win situation, you are not losing anything and are getting paid a pretty good amount of money with zero investment. No skill is required, plus zero investment. I guess this goes with every teenager, youngster or old age; all you need is a car! But, there are some risks associated that are- You have to suffer high maintenance costs and tear and wear of the car due to extra usage.
Renting out property seems simple enough. You just need to buy a house or apartment building and then rent out the rooms to tenants for a nominal fee and you are all ready for a permanent source of income. Renting property is the best investment idea that you can pursue if you’ve some extra property and you’re ready to share it with others. Plus, it does not even require any special skills or knowledge – all you need is the property that you want to lease. You can go for short period rentals or you can opt for paying guests or hostel accommodation.
But on the same side, you’re responsible for all facets of the building that includes repairs, maintenance, and chasing down tenants who don’t pay you rent. So, go for renting your property if you are ready for both the sides of the coin that are the rental income and the associated risks. So, what are you waiting for?
Invest in a high-yield CD or savings account
A certificate of deposit or CD is a financial investment with the least associated risk factors and is offered by banks. Simply, you will loan the bank money for a particular amount of time that is known as a “term length” and you gain interest on the principal during this time. A typical term length is anywhere from three months to five years. And secondly, you cannot withdraw any amount from the deposit, if you do so according to the pre-determined conditions your bank will not be able to liable to pay any pre-determined rate of interest. And on the other hand, we have saving accounts that provide quite good interest amounts. All you need to do is compare several banks and go with the one that provides you with the maximum interest percentage and least risk factors associated with them. So, what are you waiting for?
REIT stands for Real Estate Investment Trusts. These were established by U.S. Congress in 1960 to give people the opportunity to invest in income producing real estate. REITs in brief are like the mutual funds of real estate. They’re a collection of properties operated by a company (aka a trust) that uses money from investors to buy and develop real estate. If you are someone who wants to get involved with real estate investing but at the same time you don’t want to make the commitment of purchasing or financing property, then this is an irreplaceable choice for you that you would not like to let go for sure. Like with most blue-chip stocks (more on those later), REITs pay out in dividends. REITs also focus on a variety of different industries, both domestic and international. You can invest in REITs that build apartments, business buildings, or even healthcare facilities. So, what are you waiting for?
Everyone is not equally interested in investing in stocks as it is a volatile asset class and there is no guarantee of returns because of the severe fluctuations every hour minute and second. Further, if we choose to invest in equity, it is cumbersome to choose the right stock options, right companies, right brokers, and right timing for your entry and exit in the stock market. But, despite of all these, the important point to notice is that over long periods, equity has been able to deliver higher than inflation-adjusted returns compared to all other asset classes. To directly invest in equity, one needs to register in any stock market through registered broker, who will help him to proceed with the transactions further.
Whereas, on the other hand in the same category we have Blue chip stocks that are the stocks on which the companies pay out earnings to their shareholders each quarter via dividends, in order to decrease the risk factor associated with equity stocks. So, in this context, blue chip stocks get rewards on frequent basis and more early than equity stock, which obviously decreases risk factor associated with fluctuations to a great extent. These tend to be reliable and able to weather most economic downturns. Many investors like to add a few dividend paying securities via blue-chip stocks in their portfolio to ensure that they receive earnings consistently throughout the year. To ensure a powerful start, you can get started by investing in index funds that specialize in high-yielding dividends. This is the best plan if you are someone who actually knows how to deal with various aspects of stock market. So, what are you waiting for?
Summing up, as it has been perfectly said that every coin has two sides. Relating this with the current situation, we can correctly say that each passive income source comes with associated research. Every investment option comes with many pros and cons. So, while deciding where you want to invest, all you have to do is sort out your preferences, compare various options and the risk associated and then opt for the right one.
So, this article aimed at providing you with top sources of passive income and to make you learn what it takes to be successful with them, while also being well acquainted with the risks associated with each source. I hope this made justice to your queries and confusion and you are sorted with your chaos. If you are still left with some questions, we are always here to help you. And we are open for all the suggestions every time. Always remember it is never too late or too early to start something new and learn new things in your life.
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