There are plenty of steps you can take to boost your income. You could get an advanced degree or take classes to grow your job skills and set yourself up for promotions. You could also join the gig economy and spend hours each week working a side hustle on top of your regular job.
But what if there were an easier path to getting wealthier? Actually, there is.
It’s called passive income, and it has the ability to earn you thousands of dollars on a yearly basis. If that sounds good to you, here are some passive income ideas you can explore that could help you earn money without having to do a thing.
1. Owning real estate
Buying real estate doesn’t guarantee that you’ll be able to generate passive income consistently. After all, it’s possible for a rental to sit vacant for a period of time. But if you buy an income property (or multiple properties) in an area where there are lots of jobs, or in a college town where there’s a perpetual need for student housing, then there’s a good chance you’ll be able to secure a steady stream of tenants who pay you every month.
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Now, some people might argue that owning real estate isn’t 100% passive income, since there’s work involved in being a landlord. However, you can outsource that work to a property manager if you don’t want to do it yourself. They’ll take a cut of your profits, but it may be worth it to free up your time.
And if you don’t like the idea of owning physical real estate, guess what? You can still earn passive income through real estate by buying REITS, or real estate investment trusts. REITs are companies that can commonly be bought and sold just like stocks, and they make their money by leasing properties to tenants.
REITs come in different flavors. You can buy healthcare REITs, which commonly lease hospital space. Or you may decide to buy shares of industrial REITs, which lease warehousing space.
The nice thing about REITs is that you’re really doing no work beyond putting in the initial research to see which companies to buy and then keeping tabs on your investments. And because REITs are required to pay out 90% of their taxable income as dividends, they tend to serve as a reliable source of passive income.
2. Buying CDs while rates are high
When CD rates aren’t much to write home about, they’re not the best source of passive income. Even though they’re pretty much risk-free, there’s not a ton of upside to opening a 1.5% CD. But at times when CD rates are much stronger, it could very much pay to load up on them and enjoy those risk-free returns — especially if you’re a stock investor and want a way to offset some of the risk you’re taking in your portfolio.
Right now, it’s not difficult to find a CD paying 5%. If you have $20,000 and open a 12-month CD with a 5% APY, you could earn $1,000 in interest over the course of a single year.
That said, with a sum of money that large, instead of opening a single CD, a better bet may be to set up a CD ladder. That way, a portion of your money frees up at different intervals so you can explore more lucrative passive income opportunities as they arise.
3. Investing in the stock market
Investing in the stock market isn’t for the faint of heart. The stock market can swing wildly, and the value of your portfolio could shift dramatically from one week to the next. But as a long-term investment, stocks are one of the best ways to generate passive income.
Over the past 50 years, the stock market’s average annual return has been 10%. This return accounts for years of strong performance and years when the market struggled.
If you put $20,000 into a stock portfolio and do nothing for 30 years, at a 10% return, you’re looking at growing your balance to almost $350,000. And as is the case with REITs, the only work you’re doing is researching stocks initially and keeping tabs on your investments to make sure they’re performing as expected.
If you don’t even want to do that much legwork, there’s an even easier way to invest in stocks. Instead of buying shares of individual companies, you can load up on S&P 500 ETFs, or exchange-traded funds. This way, you’re putting money into the broad market and getting an instantly diversified portfolio without having to make much of an effort.
There’s no rule saying you have to hustle for every dollar you earn. These strategies could reward you with thousands of dollars in passive income, so they’re definitely worth pursuing.
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