Whether you are trying to increase your annual income or planning to build stronger savings, you must have heard the term “passive income” during your research. While digital ventures and the gig economy have blurred the lines between active income and passive income, the latter officially refers to a revenue stream that requires little to no active effort from your end.
To help you learn more about passive income, here is how you can generate passive income to generate wealth on autopilot.
How Can You Generate Passive Income?
Since passive income means revenue that you generate without active involvement, it usually refers to investment avenues that return funds to you over time. But when you learn why it is important to understand personal finance, you can determine that passive income may also come from options that require little to no investment.
The following examples give you an overview of how you can generate passive income on a consistent basis.
One of the most popular options to generate passive income is earning revenue through rental real estate. This can include a room that you turn into a vacation rental or a separate property that you offer for long-term rent. While you may have to do some work as a landlord such as requesting renters credit checks, this method does not require a significant time commitment from you.
The next suggestion also falls into the rental category but for cars. By using a car rental website, you can offer your vehicles to others through a peer-to-peer lending network. This can provide you with daily, weekly, or monthly agreements for earning passive income through your vehicle. When you perform market research, you can also determine which vehicles and platforms offer you the most return on investment (ROI).
If you want to continue using your cars but still want to generate passive income through them, you can look into a car ad space platform to offer your vehicle for on-car brand advertisements. This way, you can still drive your car on your own, but continuously receive some funds from the advertising company for driving around town with their branding.
If a finance life quiz highlights that you may not have enough funds to buy your own rental property, it doesn’t mean that you cannot generate income through real estate at all. With a real estate investment trust (REIT), you can invest in a real estate property in small portions and earn dividends in return on an ongoing basis. This straightforward mechanism makes it a popular way to earn passive income.
When learning how to create wealth through dividend investing, you may stumble upon stock investment options. These stocks are offered by companies on the stock market and return ongoing dividends or payments to shareholders based on their ongoing performance. Depending on the stocks that you buy, you can typically receive these dividends every month, every 3 months, or every 6 months.
In contrast to stocks that are bought individually and remain limited to the stake in a single company, mutual funds pool together various stocks and other financial assets into a single investment product. This limits your risk, while also increasing your chances to benefit from an increase in value for multiple assets in the future. This makes mutual funds a good alternative to stocks.
Do Bond Ladders
Bonds are another investment asset that returns a certain amount of money to you over time. While stock dividends can fluctuate in value, the returns from bonds are based upon a fixed interest rate. Similar to mutual funds, bond ladders are a collection of bonds. But unlike stocks or mutual funds, they mature over time. Bond ladders keep you from having to buy bonds after bonds after their maturity and cover possible fluctuations in interest rates over the years.
Certificate of Deposit (CD)
A certificate of deposit (CD) allows you to save your money in a specialized account for a specific period of time. While you can earn fixed interest over this investment, your money is locked for the duration of the CD. If you want a low-risk passive income opportunity, you can browse offers through a reliable certificate of deposit provider and choose one that suits your requirements.
After understanding these passive income solutions, you can determine how to generate wealth with little to no effort. This helps you secure a better future for yourself as well as your loved ones.