Top 5 Passive Income Investments

Passive income includes regular earnings from a source other than an employer or contractor. If you’re thinking about creating a passive income stream, check out these 5 ideas

1. Dividend Stocks

Dividend stocks are tried and true way to earn passive income. You will have to do plenty of research to find good stocks and invest a significant amount of money to receive large dividend checks. However, if you consistently invest money into dividend stocks you can amass a nice residual income over time.

For any of these investment opportunities, make sure you open an account at the best online brokerage, and get rewards while doing it. 

Our favorite place to invest is M1 finance. You might not have heard ofM1 finance, but it’s a free investing platform that allows you to build a portfolio, and invest in it for free.

This is amazing for investing in dividend stocks because you can build your portfolio of, say, 30 stocks. Then, your investments will be auto-allocated to your entire portfolio every deposit – for FREE! You can even auto-rebalance. Then, your dividends can also be reinvested. It’s a fantastic platform, and it was made for this.

2. Rental income

Investing in rental properties is an effective way to earn passive income. But it often requires more work than people expect.

If you don’t take the time to learn how to make it a profitable venture, you could lose your investment and then some, says John H. Graves, an Accredited Investment Fiduciary (AIF) in the Los Angeles area and author of “The 7% Solution: You Can Afford a Comfortable Retirement.”

Opportunity: To earn a passive income from rental properties, Graves says you must determine three things:

• How much return you want on the investment.
• The property’s total costs and expenses.
• The financial risks of owning the property.

For example, if your goal is to earn $10,000 a year in rental income and the property has a monthly mortgage of $2,000 and costs another $300 a month for taxes and other expenses, you’d have to charge $3,133 in monthly rent to reach your goal.

2. Annuities

Annuities are an insurance product that you pay for but can then provide you passive income for life in the form of monthly payments. The terms with annuities vary and are not always a great deal so it’s best to talk to a trusted financial advisor if you’re interested in purchasing an annuity.

These investments aren’t for everyone – they can come with high fees, and not be worth it. But if you have zero risk tolerance for loss, and are looking for a passive income stream, this could be a good potential idea for you your portfolio.

3. Affiliate marketing

With affiliate marketing, website owners, social media “influencers” or bloggers promote a third party’s product by including a link to the product on their site or social media account. Amazon might be the most well-known affiliate partner, but eBay, Awin and ShareASale are among the larger names, too.

Opportunity: When a visitor clicks on the link and makes a purchase from the third-party affiliate, the site owner earns a commission.

Affiliate marketing is considered passive because, in theory, you can earn money just by adding a link to your site or social media account. In reality, you won’t earn anything if you can’t attract readers to your site to click on the link and buy something.

4. Invest Automatically In The Stock Market

If you’re not interested in picking dividend paying stocks (and I can understand that), there are still ways to invest passively in the stock market. You can automatically invest in various ways through what’s called a robo-advisor.

A robo-advisor is just like what it sounds like – a robotic financial advisor. You spend about 10 minutes answering a few questions and setting up your account, and the system will take it from there.

The most popular robo-advisor is Betterment – which you can setup to automatically invest in and they will handle the rest for you. What’s great about Betterment is that they charge one of the lowest fees in the robo-advisor industry, and they make it really easy to invest automatically

5. Invest in a high-yield CD

Investing in a high-yield certificate of deposit (CD) at an online bank can allow you to generate a passive income and also get one of the highest interest rates in the country. You won’t even have to leave your house to make money.

Opportunity: To make the most of your CD, you’ll want to do a quick search of the nations top CD rates. It’s usually much more advantageous to go with an online bank rather than your local bank, because you’ll be able to select the top rate available in the country. And you’ll still enjoy a guaranteed return of principal up to $250,000, if your financial institution is backed by the FDIC.