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Do you want to be rich? Investing in passive income generating assets is one of the best ways of getting rich. Investing in these assets can be safe or risky. The safe assets are conservative and will create you wealth while risky assets are aggressive but can yield greater results if invested wisely. Here are seven proven income-generating assets you can invest in today;
Safe income-producing assets
These are low-risk and conservative income-generating assets. They are best for diversification since they have low trade-off volatility and do not earn you as much as the aggressive assets.
Asset 1: Certificates of Deposits (CDs)
A certificate of deposit is a low-risk finical investment offered by banks. They are simple to understand. You loan the bank some money for specified term length and gain interest on the principal during the period.
The period ranges from three months to five years. During this term length, you cannot withdraw your money without a penalty. It is less risky since your money grows at a fixed rate. In most cases, more interest is earned when you invest for longer periods. CDs are insured by the FDIC up to $250,000, which makes them less risky.
Drawbacks of investing in CDs:
- Low aggressiveness: if you are younger, you are more aggressive and should try to invest in riskier assets for higher gains. With CDs, they will not earn you so much money.
- Inflation: the average inflation in the US for the past 60 years is 3.7%. The percent is higher than the interest rate of most CDs. If you keep CDs during inflation, you can actually lose your money.
- Length of investment: it is not easy to keep your money for too long, especially when you have other goals like buying a house, car, vacations, etc.
CDs are a great choice when you want peace of mind.
Asset 2: Bonds
Bonds are like IOUs, but instead of giving money to the bank, you lend to the government. They work similarly with CDs. Bonds are;
- Extremely stable: you know what you will get when you invest in bonds
- Guaranteed return: you can choose a period you want a bond for i.e., one year, two years, five years, etc.
- Smaller in returns: have low returns when compared to assets like stocks.
Asset 3: Real Estate Investment Trusts (REITs)
REITs were established in 1960 by Congress to give people opportunities to invest in income-producing real estate. REITs are like mutual funds of real estate. They involve a collection of properties managed by a company (Trust) that uses money from investors to buy and develop real estate.
REITs payout in dividends. It is a perfect investment if you do not want the commitment of buying, financing, or managing properties. The best thing about these investments is that you can invest in domestic and international companies that build apartments, commercial buildings, and health care facilities.
REITs have some taxable implications that must be complied with.
You can check how to open a mutual fund and get started. If you do not know what to do, you can try the Vanguard REIT EFT (VNQ), which tracks a REIT index from MSCI Inc., a notable investment group and get started.
Risky income-producing assets
Risky investments require active management on your part. If you put the right effort on these assets, they have the potential to earn you high sums of money.
Asset 4: Dividend-yielding stocks
Some companies pay out earnings to shareholders quarterly through dividends. These are known as blue-chip stocks that are reliable and can overcome most economic downturns.
Adding these assets to your investments guarantees consistent income throughout the year. You can start by investing in some index funds that specialize in high-yielding dividends.
Here are some top suggestions;
- Vanguard Dividend Appreciation Fund (VDAIX)
- Vanguard High Dividend Yield Index Fund (VHDYX)
- Vanguard Dividend Growth Fund (VDIGX)
- T. Rowe Price Dividend Growth Fund (PRDGX)
Asset 5: Property Rentals
You can buy a house/apartment and rent it out. The process is simple:
- Buy a house or apartment
- Rent out the rooms to tenants for a nominal fee
- Collect rental checks.
As the building owner, you will be responsible for house maintenance and other costs like garbage collection, electricity, and water bills.
If you purchase the property through a mortgage, you must ensure you get enough money to repay the monthly installments and not affect your income negatively.
You can also find short-term rental deals like Airbnb, where you get guaranteed income.
Asset 6: Peer-to-peer lending
Also known as crowdlending. It involves loaning money to others through a peer-to-peer (P2P) lending platform, and they will pay you with interest. An example is the Lending Club.
The person seeking a loan does not have to go through background checks and high-interest, unlike with the banks.
It is, however, a risky investment, especially when dealing with people with bad credit history.
Asset 7: Creating your own product
This is one of the best ways to make more money. It is scalable and also low cost. Some products only need some skills, and you get started. These products include;
- Online courses
You need to create a good product that will sell. You can get ideas from our free course on starting your own business.
Earn more money today
Income-producing assets can supplement your income in a big way.
The ultimate guide to making money
- Create multiple income streams for a consistent revenue
- Start your own business and escape the 9 to 5 jobs for good
- Increase your income through side hustles