BAJAJ BROKING
The idea of financial independence is an attractive notion for almost every one of us, but sometimes even a regular, well-paying job might not help us achieve that dream. This is where the idea of financial security through passive income comes into the picture.
The idea of passive income can easily be defined as a source of income that takes very little time or effort to work through. Passive income sources are usually an additional income source and help you earn over and above your traditional job. Think of it as a means to generate extra cash flow. Now who wouldn’t want that?
Since passive income helps you earn extra, it can also act as a safety net, if you suffer a job loss. There are so many passive income streams in the market nowadays, that any of your skills and talents can easily be utilised through them and help you earn extra.
Here is a list of some of the best passive income streams that can help you earn a few extra bucks, over and above your regular job.
1. Rental Income
If you are someone who has quite a bit of capital lying around and you don’t know what to do with it, investing in a rental property might be a good idea. Rental income involves the purchase of a property that can then be rented out to a tenant. Such a passive income stream will ensure monthly rental payments for you and help you build a nice nest egg to fall back on in case of emergencies.
Of course, there is no doubt that you would need a large capital to purchase the property first. A property in a location that is popular yet less expensive will help generate better rental income opportunities. However, it is always better to weigh the pros and cons in the rental market before purchasing a rental property.
2. Investing in Dividend Stocks
If you are aware of the workings of the share market, then you could always invest in dividend stocks to generate some passive income. Company shareholders who have invested in dividend-yielding stocks receive quarterly payments from the company. This payment is made by the company from the profits generated in that quarter.
If you have decided to invest in more than a few shares, then you should know that dividend payments are made on a per-share basis. While these payments might be very small and not substantial enough to be considered significant income, they are still important. There is only the initial investment in the stocks involved, and from there on you can sit back and watch the passive income, however modest, come in. Of course, the catch is to know which stock is the right one for you.
1. Peer-to-Peer Lending
There are peer-to-peer or P2P lending platforms that exist to help you crowdfund your passive income. With the help of P2P lending, people can borrow money from individual investors on the platform. These websites or platforms help a lender match with an investor when they are seeking a loan. The investor or lender can then choose to fund this loan with an interest rate that can be higher than the usual bank rates.
The interest rate in P2P is high because the investors are risking their money as well. The chances of the borrower defaulting on the loan exist.
2. Bond Ladder Investment
The bond ladder is a method of investing in bonds. In this method, you can invest in bonds that have different maturation dates and span over a stretched-out period. With this spaced-out maturity timeline in place, the risk of reinvestment decreases. Reinvestment risk can be defined as the risk an investor might face if they decide to reinvest their money in bonds when the interest payments are low.
3. Open a High-Yield Savings Account
Think of the high-yield savings account or HYSA as an alternative to the traditional savings account. These accounts offer higher interest payments when compared to your usual savings account. So essentially you could just put money in the bank and generate your passive income easily.
However, before opening the account, always read the fine print and the terms and conditions associated with it to not overlook any potential risks.
There are multiple income streams out there to explore. Some might be riskier than others while some might yield less income. This is precisely why it is important to research them before you decide to land on one or more to generate your passive income.
Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing.
This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.
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