Did you know that passive income is the new golden goose? That’s right, the new hotness when it comes to personal finance and investing. But why is this so important? And how can you invest your passive income to make money sooner rather than later? Read on to find out more. In this article, we will discuss the different types of passive income investments you can make today in your financial portfolio.
Passive investment means any investment that does not require a lot of your time or effort to manage; instead, it earns money for you automatically with very little effort on your part. Some examples of passive income investments are dividend stocks, real estate investment trusts (REITs), fixed income securities (bonds), and equity instruments like stocks and mutual funds.
These investments grow as long as they continue to pay dividends or keep growing in value without decreasing in value. Passive income is one of the easiest ways to build wealth because most companies don’t require much input from the investor except for some initial cash up front. In other words, once you have invested passively in a company, it will take care of itself until it pays dividends again or grows even bigger until its shares finally increase in value again and give you an ROI on your initial investment.
What is Passive Income?
Passive income is income that does not require a lot of your time or effort to manage, but is generated without human input. This is important because it’s what distinguishes it as a reliable and consistent passive income stream. Passive income is not how much you get from it, it’s how much you don’t have to put into it in the first place. There are three basic ways to build a passive income portfolio. The first is through investments such as stocks and bonds. The second is by owning a business and the third is by running a side hustle.
Types of Passive Income
– Dividend Stocks: The Oldest and Most Reliable – The oldest and most reliable form of passive income is simply owning stocks that pay dividends. Dividend stocks are shares of a company that will pay an investor a portion of the profits from that company’s profits. You don’t have to own a specific percentage of the company. All you need is to own a share of the company itself.
This is why dividend stocks are the most reliable: they are the most basic form of passive income and, because they are shares of a company, they can be bought and sold on any exchange during any time period. One of the biggest benefits of dividend stocks is that they provide an immediate return on investment (ROI), meaning you can cash out your shares and take your profits today. The downside of dividend stocks is that they are not as risky as other investments, but they also offer little potential for growth.
That’s why you want to make sure you diversify your portfolio by investing in a variety of stocks to diversify your risk and increase your overall return. – Real Estate Investment Trusts (REITs): A Decent Investment for Long-Term Growth – Real estate investment trusts (REITs) are a type of real estate investment that many people are investing in as a form of passive income. Unlike owning a single property that you can sell at any time but has no guarantee of return, owning a share of a real estate investment trust guarantees a steady return on your investment. Real estate investments are typically tracked on an index such as the S&P 500 or the Dow Jones Industrial Average.
They are also backed by a law that ensures the shares always trade at a minimum amount. REITs are a decent investment for long-term growth. While they offer a steady return, they don’t take much risk on your part compared to owning a single property.
That’s because you own shares of a company that invests in real estate, which could go up or down in value depending on the economy, interest rates, and many other factors. If a real estate investment is not doing well, you can simply sell your shares and put the money into another investment.
Examples of Passive Income Investments
– Buying and holding a broad market index fund that tracks the S&P 500 or the Dow Jones Industrial Average is a solid example of a dividend-paying passive income investment.
You can buy these funds through most brokerage firms or online brokerage platforms. – Real estate is also a great example of a solid passive income investment. Owning a single property may make more sense for some people, but investing in real estate can offer an even greater potential for growth.
Invest in a diversified portfolio of real estate investments through a real estate investment trust. You can purchase these through various online brokerage platforms or your local brokerage office.
Basics of Stocks and Mutual Funds
Stocks and mutual funds are both types of investments where you own a share in a company that issues that company’s stock. In this way, you are a shareholder in the company and are entitled to a portion of that company’s profits.
A key difference between stocks and mutual funds is that stocks are stocks and mutual funds are investment-grade bonds, which are debt securities issued by a corporation that are backed by the government.
Stock funds are similar to dividend stocks in that they are shares of a company that pay a percentage of the profits of that company. It’s best to diversify your funds by investing in a range of investments, including stocks in different industries and geographic locations.
REITs
A Decent Investment for Long-Term Growth – Real estate investment trusts are basically real estate companies that own properties and simply share profits with investors.
Unlike owning a single property that you can sell at any time, owning a share of a real estate investment trust guarantees a steady return on your investment.
Like dividend stocks, real estate investment trusts are easily bought and sold on an exchange during any time period, making them an excellent form of passive income.
UK examples
You can search for these at your investment site of choice
AEW UK REIT
KCR Residential REIT
iShares UK Property UCITS ETF
Custodian REIT
Ediston Property Investment Company
I use Hargreaves Lansdown and they are listed on there as well as many others
Bonds
A Safe Investment With a Guaranteed Return – Bonds are basically loans issued by a government or other entity that demand a payment at a fixed rate of interest.
They are a safe investment with a guaranteed return of interest that falls within a certain range, such as 3%. Compared to stocks, bonds are less risky and offer a much lower potential for growth. That’s because they are backed by the government and are therefore a safer investment.
ETFs (Exchange Traded Funds)
ETFs are essentially a type of investment fund that tracks a range of different stocks and bonds.
You can buy a single ETF that tracks an entire market index or you can put together a diversified portfolio of ETFs. Both of these options provide a solid range of investments for a variety of different investment goals.
Some popular ETFs to invest in are
Vanguard Funds plc S&P 500 UCITS ETF USD(GBP)
iShares II plc Global Clean Energy UCITS ETF (Dist)
iShares plc Core FTSE 100 UCITS ETF (Dist)
Vanguard Funds plc S&P 500 UCITS ETF USD ACC (GBP)
iShares Physical Metals plc Physical Gold ETC
WisdomTree Physical Gold (GBP) 14,655.00
Vanguard Funds plc FTSE 100 UCITS ETF GB
Vanguard Funds plc FTSE 250 UCITS ETF
Vanguard Funds plc FTSE All-World UCITS ETF (USD) Distributing – GBP
iShares plc FTSE UK Dividend UCITS ETF
I use Hargreaves Lansdown and they are listed on there as well as many others, you will notice when you do your investigations that common names come up such as Vanguard and iShares due to the sheer size of the funds usually
Conclusion
Passive income is simply the amount of money that does not require a lot of your time or effort to manage.
Passive income can come from investing in stocks, bonds, real estate, or even running a side hustle. The best part about these investments is that they don’t require a lot of risk or a lot of effort to reap the rewards. In this article, we have briefly discussed the best passive income investments that can be made today to build wealth.
