Have you ever found yourself longing for financial independence without being confined to a traditional 9-5 job? Well, you’re certainly not alone! The great news is that there are actually many passive income streams that are tailored to your unique preferences and objectives.
This guide is designed to help you explore and identify the best passive income streams for your specific situation so that you can achieve the financial freedom you’ve been always dreaming of.
What is passive income?
To begin, let’s understand what passive income means.
Essentially, passive income is the money you earn without actively working for it
For instance, if you invest in a business and receive a portion of its profits without participating in its operations, the money you earn from that investment is considered passive income. In other words, it’s money that comes to you without requiring constant effort on your part.
You can see passive income as planting an apple tree. First, you need to look for the right place to plant the tree. Then, you must take care of the tree so it grows healthy; you need to water and fertilize it. As the tree keeps growing, it needs protection from pests, insects, and in some cases even animals.
However, after all the effort you put into it during its initial stages, it will reach a point at which you won’t need to care for it as much. It will be strong and healthy, providing delicious apples without you having to work for them.
The same thing goes for a passive income stream. First, you need to invest some time and/or money if you want to generate income. Then, you have to check every now and then if everything’s working out well. As time goes by, and if you do things right, you will reap the benefits of your investment in the form of passive income.
Here are some passive income streams
If you know where to look, you’ll find that there are several ways in which you can develop sources of income that will keep making you money on their own. Here are some of the most popular passive income streams:
- Rental properties: If you own a house, department, or even an extra room, you have a potential source of passive income. If you rent it, you will be earning income with little to no work at all.
- Create and sell online courses: If you are really good at something, you can create a course from it and sell it online. Cooking, playing guitar, solving complex math problems… Whatever works! Once your course is published, it can generate sales for years to come.
- Create a blog or a YouTube channel: You can get paid for showing ads on your digital content, so this might need more work upfront. Nevertheless, if you make a name for yourself, ad viewers will keep coming in passively.
- Write a book: Sure, this one may sound like a lot of work. Nevertheless, once your book is done and published it can generate sales for years over years, making you earn royalties over the work that took you just a couple of months.
- Invest money in a startup business: If you know someone who needs money for their business, you could invest in it and become a business partner.
All these passive income streams might work out for you, but you haven’t seen our best recommendation yet. Are you ready?
Invest your way to passive income streams
One of the most popular and accessible passive income streams is investing in stocks.
As you should know, stocks are pieces of a company representing the percentage someone owns of an organization. You can buy stocks of almost every important company around the world, depending on the stock market you focus on.
“How can I earn a passive income through stocks?” you may ask. Well, there are several methods:
The most common way to turn your investments into passive income streams is through dividends. Dividends are a company’s earnings distributed to the shareholders (yes, that’s you).
You can invest in a big company and you’ll receive dividends each month, quarter, or year.
Investing in dividend stocks is highly recommended by very successful investors, as the passive income you’ll receive can make your investment grow exponentially over time thanks to compound interest.
An interesting article published by The Motley Fool for Nasdaq revealed that in 2021, Berkshire Hathaway, Warren Buffet’s holding company, earned around $3.8 billion in dividend payments alone. Sure, these may be astronomical numbers for an individual investor, but this case proves the point that periodically investing in dividend stocks could literally pay off in the long run.
Did you know there’s a way to invest in real estate and reaps the rewards without actually having to purchase a physical property?
Real Estate Investment Trusts are companies that own and manage real estate to let individual small investors make gains from income-generating properties without having to buy them. By investing in REITs shares you can earn a portion of the revenue generated in the real estate business without going through the whole process of acquiring and managing properties. You can even invest in REITs ETFs, which makes it much easier!
Another way to earn a passive income by investing is growth stocks. These are stocks from companies that, as its name suggests, are expected to grow at a faster rate than the average.
For instance, imagine you bought some Amazon stocks just when they launched. If you had bought $100 worth of stocks at their initial price of $18 per share, by the beginning of 2020 your investment would have been worth around $129,186, with a total return of 129,000% over your initial $100.
As you can see, investing in growth stocks means that you can see revenue in less time than with other kinds of stocks. Their stock price often increases faster, so you can choose either selling them for good capital gains or keeping them for future profits. You won’t be earning a recurring income as you would with dividend stocks, but growth stocks are, without a doubt, a perfect way to let the value of your money increase passively over time.
The bottom line
As we mentioned previously, generating passive income streams by investing in stocks could be the most accessible option for everyone. This may be because you don’t need to put in the initial effort to create an asset like a course or a book. Yes, you need some money for your initial investment, but with fractional share options now you can get started with as little as $5.
Want to start building those passive income streams of your own? You can start investing in stocks right now! One of the safest and easiest ways to enter the investment game is through the FlexInvest platform. You can have access to top companies in global stock markets. There are also those fractional shares options we mentioned!
If you want to learn more about the stock market and some top tips to be a successful investor, make sure to explore our blog and read the rest of the articles. Surely you’ll find a lot more useful information!