Disclaimer–I am not a financial advisor. The information provided here is for general informational purposes only and should not be considered as professional advice. Please consult with a certified financial planner or advisor for specific guidance regarding your financial situation. Trading and investing in financial markets involve risks, and you should be aware of the potential for substantial losses.
Passive Income, What is it and how do you get started?
First lets define the meaning of passive income. This is defined by the Internal Revenue Service (IRS). Which is derived from two different sources, including rental property or a business in which one does not actively participate, like being paid royalties or stock dividends.
Understanding the definition of Passive Income must be clearly understood. Now, Let’s dive into the ways to create passive income streams. There are various methods that exist for creating passive income streams.
Below we will discover several passive income streams.
- Invest in Dividend Stocks : Dividend Stocks involve regular profit payments to investors owning a company’s stock. Which means, dividends are paid out in cash on a monthly, quarterly, or yearly basis. With the option to have them reinvested in the stock, contributing to the long-term growth of share value.
- Here is a short list of Dividend stocks below that are paying high yields. these are current as of January 25, 2023.
- Devon Energy (DVN)- Producer Oil /Gas – Dividend Yield: 8.4 %
- V. F. Corporation ( VFC)-Apparel / Footwear – Dividend Yield: 6.7 %
- Verizon Communications (VZ) Technology – Dividend Yield : 6.6%
- AT&T (T) -Telecommunications -Dividend Yield: 5.8%
- Walgreens Boots Alliance (WBA)-Retail Pharmacy – Dividend Yield: 5.4%
- Phillip Morris International (PM) -Tobacco Products -Dividend Yield: 5%
- 3 M Company (MMM) – Products Manufacture – Dividend Yield: 4.9%
- Intel (INTC) Semiconductor Producer- Dividend Yield: 4.8%
- Dow Inc (DOW) -Chemical Production- Dividend Yield: 4.8%
- International Business Machines (IBM) Tech Company- Dividend Yield 4.7%
Note: Consistent investment in robust companies is essential to succeeding with dividend stocks.
2. Invest in REITs: REITs, or companies financing income-producing real estate, operate across various property sectors. Investing in companies like FUND RISE, which diversify property investments, resembles investing in dividend stocks. The option to reinvest dividends or receive cash deposits is similar in both cases.
The best performing REITs as of February 2023 are:
- Getty Realty Corp (GTY) 1 year Performance Return – 33.9 %
- Gaming & Leisure Properties, Inc. (GLPI) 1 Year Performance – 28.8 %
- VIVI Properties, Inc. ( VICI) 1 Year Performance – 28.8 %
- Iron Mountain (IRM) 1 Year Performance – 26.7 %
Other types of REITs involve personal investment in properties like residential purchases, requiring substantial investments and property maintenance. Engaging a management company is recommended to reduce associated risks to a reasonable level.
3. Index Funds: Index Funds represent a type of mutual fund or exchange-traded fund that tracks market index returns. Tracking a broadly diversified index and offering some of the lowest costs on public markets. Cost is a crucial factor influencing total returns in these index funds, sourced from Bankrate.com, accurate as of February 2023.
- Fidelity ZERO Large Cap Index
- Vanguard S&P 500 ETF
- SPDR S&P 500 ETF Trust
- iShares Core S&P 500 ETF
- Schwab S&P 500 Index Fund
- Shelton NASDAQ-100 Index Direct
- Invesco QQQ Trust ETF
- Vanguard Russell 2000 ETF
- Vanguard Total Stock Market ETF
- SPDR Dow Jones Industrial Average ETF Trust
These funds give you a wider more divers type of investments. These are mutual funds with many top funds wrapped into one.
Being a Banker:
4. Being a Banker : Online platforms like Prosper and others primarily offer crowdfunded personal loans with favorable terms and rates. However, investments are made based on your credit score, repayment terms, loan amount, and duration. Which follows a preset evaluation criteria. You can diversify portfolios with small investments. As of the current writing, Prosper is available only in certain states.
5. Renting Out A Spare Bedroom: An online platform service enables property owners to rent out their spaces to travelers seeking accommodations. If you have spare room available, renting it out on a weekly or monthly basis through platforms like AirBNB can generate passive income. Further, when listing your space for rent, ensure to include appealing details in the description.
6. Investing In Municipal Bonds: Municipal bonds, defined as debt securities issued by states or counties, fall into two categories: Obligation Bonds and Revenue Bonds. Obligation bonds rely on general municipal revenue, Revenue Bonds are supported by specific income sources like toll road revenue or municipal sewer system funds. Based on your bond purchase amount, the municipality provides regular monthly interest or income payments, ensuring a secure investment with favorable returns. These investments may be tax-free at the federal level and in states like California or New York. While non-residents purchasing bonds must pay state taxes on earned interest, leading to potential tax implications depending on your location.
Prior to investing in any financial product, it is advisable to consult with a financial planner. Conduct thorough research and plan your course for high-yield investments. More passive income strategies will be shared in other blog posts.