3 Ways of Passive Income Sources for Beginners.Most of us dream of early retirement, a nice little egg-nest, savings account, earn passive income, financial freedom, more time to spend with those we value; a dream without a plan is just a wish. We need to put some wheels on that dream.
Passive income has long been the holy grail for any entrepreneur worth his salt. Your income is your route to wealth but you don’t need a grueling 9 to 5 to get to it, well not eventually anyway.
While the importance of passive income sources is undoubted, the research required to achieve a respectable amount of cash flow from automatically-recurring revenue streams is often a deterrent.
Building passive income requires foresight and strategy, but since you’re here I’ll assume that you already know you want to explore viable passive income sources. My top picks for passive income sources work for any income bracket and any amount of experience or inexperience:
Source One: Seek out Dividend Kings
Shareholders in companies with dividend-yielding stocks receive regular payments on their initial capital investment. Since the income from the stock market isn’t related to any activity other than the initial financial investment, owning dividend-yielding stocks is arguably the most passive forms of making money and building wealth.
Companies pay cash dividends on a quarterly basis out of their profits and these are paid per share of stock. Dividend stocks are a great resource for generating passive income. However, you will need to buy a significant number of shares to see a healthy stream of revenue.
Your best bet is buying stocks in Dividend Kings, companies that have been paying dividends for 50 years, or Dividend Aristocrats, companies that have been paying dividends for 25 years. Some companies pay at a rate as high as 8%, so don’t skimp on research when choosing a dividend-yielding stock to buy as a source of passive income.
Source 2: Sell a Covered Call for Gains
A great, though often overlooked, source of passive income is selling call options on stocks. You can then generate income by collecting options premiums. To execute this strategy, you’ll need to buy (long) the stock (over 100 shares) and then write (sell) call options for that stock. The strategy works best if you expect the stock to stay within a pretty tight range of prices.
Selling a call against your stock ensures that even if your option expires worthless you’ve managed to make what is essentially free money. Selling call options also allows short-term capital gains, unlike most passive income options. Another benefit is that while dividend taxes are paid at a differential rate, options are taxed at an ordinary tax rate which is usually very low.
Covered call strategies can be useful for generating profits in flat markets and, in some scenarios, they can provide higher returns with lower risk than the underlying initial investment made.
Source 3: Rents and REITS
Real estate has to be the oldest source of passive income. Rental income in particular. Clearly, it is a great source for generating income, but it also requires a sizable upfront investment. If you have extra cash lying around, you can certainly opt to invest in some real estate. With a little research, you might find that there are several properties out there for smaller budgets.
But there are also several ways you can own rental properties indirectly, and turn them into a source of recurring passive income.
One is to be an investor in a rental house, owning a share of it while someone else handles the maintenance and collects the rent. The downsides include lower returns than if you owned the property outright, illiquidity, and potential problems if your business partner(s) makes mistakes.
Another alternative is owning shares of a real estate investment trust or REIT. The shares are often as liquid as shares of stock. In this case, you have a reliable source of passive income with zero personal liability.
Investing in REITs can be approached in a multitude of ways, including purchasing shares of publicly traded REIT stocks, mutual funds, and exchange-traded funds. REITs generally own and/or manage income-producing commercial real estate, whether it’s the properties themselves or the mortgages. Therefore, your money is safe as it multiplies.
Passive income is not a get-rich-quick scheme, and it requires patience and diligence. Steady, profitable passive income options can help you build some serious wealth over the long haul. Most passive income sources may take some work to get up and running, but they could eventually earn you money while you sleep. Hopefully, this article has given you a nudge in the right direction. What are your financial goals? How do you plan to diversify your income? What are your passive income ideas? Do you have a side hustle or use affiliate marketing for side income?
To learn more go to: https://infinityinvesting.com/getting-started/
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