7 ways to earn passive income

Passive income is essentially the income you generate from investments where you do not actively participate in managing the investment. It is a time-saving way to earn more and supplement your income. There are multiple ways in which you can generate passive income. Here are a few ideas to supplement your income. 

Bonds

Investing in bonds assures you of a fixed income from interest. Bonds can be issued by various companies, municipalities, and governments to raise capital. They are a lot safer to invest in than stocks. However, the returns are lower than stocks. Research and understand the creditworthiness of the issuer before investing. 

Rental Properties

Renting properties is perhaps the most popular and easiest way of earning passive income. If you own a property you aren’t actively using, consider renting it out. If managed well, rental properties can accrue a significant amount. There are challenges to owning a rental property as well. Property management, maintenance, and tenant issues are some obstacles you may face. If you’re looking to invest in real estate, it would be wise to research and understand the market before investing significantly. Talk to real estate brokers or people in the know and understand the area of investment and the intricacies of the deal.

Real Estate Investment Trusts (REITs)

Real Estate Investment Trusts (REITs) own and manage real estate properties. By investing in REITs, you can earn from rent from tenants. There are numerous advantages to REITs over owning rental properties. Diversification, liquidity, and professional management are just some of them. Some of the risks with REITs include interest rate risk and economic downturns. 

Dividend-paying stocks

Dividend-paying stocks pay out a portion of their earnings to shareholders as dividends. These stocks can be issued by companies in a stable financial position and those with a history of paying out dividends. You can earn a regular income by investing in these stocks without selling them. How much you earn will depend on the company’s earnings and dividend rate. 

Annuities

Annuities provide a regular income in exchange for a lump sum payment and are issued by insurance companies. They provide a guaranteed amount for a fixed period or the rest of your life. This type of investment works well if you are looking for a steady income stream post-retirement. 

Peer-to-peer Lending

Peer-to-peer (P2P) lending is a type of investment where you can lend money as an individual to a borrower using an online platform. This method offers investors a higher return on their investment over traditional savings accounts and bonds. However, the risk here is a lot higher. Borrower default and platform bankruptcy are the prime issues to address. 

Exchange-Traded Funds (ETFs)

Exchange-Traded Funds (ETFs) are a type of investment fund holding a portfolio of stocks, bonds, or other assets. By investing in ETFs, you can earn income from the dividends and interest payments of the underlying assets. ETFs offer several advantages over mutual funds, including lower fees, greater flexibility, and tax efficiency.