The goal for most people is to retire eventually, and to do that, you need a nest egg. Building your wealth is something best started early. The sooner you get started, the more lucrative the benefits will be.
No matter where you are in your financial journey, you can increase your wealth. You don’t need to work yourself into an early grave or put your family and health on the back burner.
These six income-producing assets can generate your passive income, so you can reap the rewards of working smarter, not harder.
1. Stocks/Equities
Playing the market sounds like a gamble, and, in a way, it is.
Many risks go into putting your money in stocks and hoping a company does well. It also has the potential to give you some serious reward with that risk.
The terms “stock” and “equity” often mean the same thing, but there is a slight difference between the two. When dealing with the stock market, stocks are shares of equity in a company that you can invest in to have “ownership” in said business.
Equity is the value of the business when it has taken care of its liabilities. It’s the company’s net worth. A company can build equity by selling shares of its stock on the market. The price of the stock rises as the company’s equity increases.
That’s why buying stocks can be risky. You need to know when to invest in a company that’s going to make a profit.
Buying in on one when it has more losses than gains is the cheapest time to get your foot in the door. Then, you hope the equity rises.
2. Bonds
If stocks and equities aren’t in your comfort zone yet, you can always move to bonds instead.
There isn’t as much growth with bonds, but they are also less risky. And adding a new type of investment to your portfolio is a great way to diversify, which is the goal for most investors.
Bonds help to balance out the riskiness of other investments, like stocks. A bond opens when a company needs to take out a loan. It looks to investors instead of a bank to get the capital.
Companies give investors an IOU, of sorts, in the form of an interest coupon. It states the annual interest rate the investor will receive for the cash infusion they gave the company.
On or after the maturity date, the company will return the principal. The interest is paid annually or semiannually to the holder during the term of the bond.
3. Real Estate
You’ve probably heard by now that real estate is where it’s at when it comes to investing.
Those with the money and the know-how get into flipping houses. Most people don’t have that kind of cash lying around or the time and skill to put into home renovations.
Instead, you can use these tips to get involved in real estate without the hands-on part:
- Buy an REIT.
An REIT, or real estate investment trust, works like a mutual fund. You invest in a real estate company that does the hands-on work, owning hotels or retail spaces. If the company is successful, they pay their investors in dividends. - Purchase rental properties.
Buying a second or third home that’s in good shape and then renting it out for more than the mortgage is a common income-producing avenue.
Another popular way to make money on your property is to make it an Airbnb or Vrbo type of rental. Owners rent to short-term vacationers or those in need of temporary housing.
As long as you set aside enough to cover insurance, repairs, and taxes, you’ll eventually turn a profit.
- Rent a room.
If you have spare space, you can rent it out to a lodger by the week or month. You already have the property; now, it’s a matter of making the most of it safely.
There are so many ways to make a passive profit with rental properties. You just need to find a way you’re comfortable with and get started!
4. Angel Investing
Do you imagine being a part of a small business without doing the work? Are you willing to support burgeoning entrepreneurs with great ideas? Then angel investing might be your passive income stream.
Angel investors get in on the ground floor of a business and offer them the investment capital they need to open their doors.
If the business grows, the investor gets paid based on the share of equity they have. If it doesn’t, the investor already knows the risks and can lose the amount they funded.
Some of the most successful angel-invested companies include Google, Business Insider, and SolidWare.
Even billionaire Jeff Bezos knows the potential for profit from angel investing. He frequently backs startups.
5. Farmland Investments
Agriculture provides our essential food sources, and farmers are quickly becoming overrun by massive corporations. The larger companies produce less-healthy GMO-type foods for lower prices.
Investing in farmland gives the real farmers a chance to hold onto their property and compete with the big dogs. Farmers use the leased property to grow crops. The investors earn a profit off the lease payments.
Investors can always choose to sell the property if the value of the land increases, too.
Farmland investing can be active or passive. You can buy the land and rent it out to the farmers, or you can have a hand in doing the farming yourself for more of a profit.
6. Opening a Franchise
This one requires a lot of investment capital upfront, but it’s likely to net you a healthy return if you have it.
People build franchises off of businesses that are already successful.
The owner of the franchise usually hires someone to run the business. So you make a passive income after your initial legwork and cash influx.
The drawback of franchising is you have to follow the rules of the corporation. Owners and the site where the business will be must be pre-approved.
There is a lot of research and red-tape that goes into opening a franchised business. But once it’s all done and your location is successful, you can reap the rewards from a distance.
other related articles of interest:
4 Saving Habits That Can Build Your Wealth in Any Career
What are the Keys to Building Real Wealth? Fake Assets vs Real Assets
Conclusion
Financial experts around the world recommend a passive stream of income. It’s considered to be a crucial way to protect your economic future.
So much is up in the air since the pandemic of COVID-19 flipped everything upside down. A diverse portfolio with a few of these income-producing assets is smart business sense.
Image Credit: income producing assets by twenty20.com
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