I am sure that the moment you read the phrase, passive income, images of you sitting on lakefront fishing or lazing on the French Riviera flash in front of you.
So what exactly would be a passive?
In very simple terms, it is any income option for which you do not have to try very hard.
Most passive income ideas are so designed that you can earn without being actively involved with the entire process.
It means you continue to make income and maintain a steady cash flow without too much of an effort.
The highlight of these ideas is the regular chain of funds is not disturbed, and you don’t have to participate actively in earning this money.
But, however profitable this type of idea might be, it is certainly not easy to sustain this endeavor.
Most times, these passive income ideas need you to invest the time effectively to start off with and therefore, the choices that you undertake to make this income become important.
How to Generate Passive Income
Here is the list of 13 common and popular ways to generate passive income to help invest your time better and generate sustainable income ideas.
However, make sure you to see the 13+1 at the end of this list:
- Generate Passive Income via Investing in Index Funds
- Create a Fixed Deposit for Passive Income
- Use a Robo Advisor for Your Investment
- Invest in Real Estate
- Paying Guest
- REIT Investment
- Write a Book
- Create Audio Books/Podcast
- Make YouTube Videos
- Invest in Lending Club to Generate Passive Income
- Pay off Your Credit Card Debt
- Photographs to Help Generate Passive Income
- Take up Equity Share in Business
- The 13+1 Way
1. Generate Passive Income via Investing in Index Funds
You have to understand that not all forms of investment in stocks can count as passive income.
But there are some options that you could surely explore.
You could look at investing in the Index Fund to realize this objective.
The advantage is that you do not have to buy and sell individual stocks and just create a portfolio whose underlying value is derived from the primary index.
Even if you are not very keen about the core index, you can choose to go for sector specific Index as well.
There are several options like energy, precious metals, banking emerging markets and a lot of others.
Unlike regular stock markets, you can simply create your portfolio and then sit back and relax.
It does not need to be monitored on a minute to minute basis like individual stock positions.
Once you create a portfolio and assign time duration for it, you would not need to monitor the account on a day to day basis.
The icing on the cake is that you can enjoy the income generated this way pretty unhindered, even sitting far away from the hub of stock markets and deep in the lap of nature.
2. Create a Fixed Deposit for Passive Income
That brings us to an even simpler form of passive income that functions pretty effectively.
Let’s assume you have taken an early retirement and put your entire savings in a bank.
You can spend the rest of your life enjoying the income generated as deposit interest on this amount.
However, this might not be a great option for everyone.
It is an effective idea if you do not have a huge amount of liability and have a clear idea of the amount of money that you have saved thus far and would need in future.
Additionally, you need to have a clear idea about the future expenses as well.
Only then you will be able to allocate a set amount to fund future expenses in a constructive and appropriate manner.
This is exactly why fixed deposit can be a wonderful source of passive income for aged couples and those who have taken retirement from their professional commitments.
Most times, they already have a house and also have accounted for their kids’ education and similar expenses.
The benefit of this type of income is the returns are never volatile, and they get a far better opportunity to enjoy their earnings without active monitoring or regular updates.
3. Use a Robo Advisor for Your Investment
Let’s say that you want to take advantage of various types of investment tools that are available to generate passive income.
There are still ways in which you can do it.
You need to put all your money in an account and allow a computer-based algorithm make all the calculation and work upon it.
You present details about the kind of risk that you are ready to get exposed to and then let the algorithm manage the account on your behalf.
Just like a regular wealth manager, these robo advisors will keep your account balanced and respond to various market developments in an appropriate fashion.
Given the fact that there is no actual person managing the account reduces the costs involved significantly and your resultant fees is lot less.
This is perhaps as passive income idea as you could come up with.
In many ways, this helps you take advantage of both options equally well.
You get someone else to manage your account without paying a bomb and can help your wealth grow at a lot more dynamic pace.
The reason why robo-advisors are such popular options is that most times, they work towards minimizing your tax liability and provide a comprehensive view of the overall financial liabilities.
The low charges make it possible for even low-end investors to take advantage of this route to generate passive income.
The sleek set-up coupled with the advanced technology make your investment with these robo advisors rather safe and long standing.
Whether you are investing a huge sum of money or making a reasonable investment with them, you can take advantage of the state of art alternatives which help your wealth growth passively.
4. Invest in Real Estate
When you are considering passive income sources and looking at ideal investment opportunities to generate the same, it is hard not to consider the option of real estate.
They are relatively illiquid but can generate a reasonable return over an extended period of time.
Of course, in the initial phase, you do have to do some work in terms of generating the right resources and getting the most appropriate property.
Investing in rental property and letting it out on rent is one of the most useful and sustainable options to generate passive income.
Let’s say you buy a rental property on loan and first of all, use the rent that you collect to pay off the mortgage.
Once you have paid up the loan, the same rent will become a passive income source for you.
You can also use the same amount to invest in more property and generate an income source that keeps getting bigger in size.
In case you feel necessary, you also have professional property managers as well. For a monthly charge of the overall rent, they will manage your real estate investment.
There are professional property managers who can manage your property for you, usually for around 10% of the monthly rent.
This professional management can make the investment a lot more passive, but in this case, you have to give up a portion of your income to the property manager.
That will, of course, depend on the kind of income that you are hoping to generate from the select option.
Moreover, the ability to scale up is also a big advantage when you look at it as a tool to generate passive income.
For example, if you are keen on increasing the income, you can look at using the capital generated to increase it.
5. Paying Guest
Another interesting opportunity to create passive income would be to rent out part of your house.
Let’s say you have a two-storey house and have only two family members.
You might be predominantly only using a part of the house.
The rest of it remains rather unused, and you have to pay a significant amount of money for its upkeep and maintenance.
A simple option is let out these additional rooms on rent.
There are many students and working individuals who are on a lookout for these cheaper accommodation options when they can’t afford a full flat.
For you, it serves a dual purpose.
You get an instant alternative to care for the unused portion of your house plus an additional source of income.
If this amount is adequate, you can quite easily create this as a channel to divert your income source and depend increasingly on this passive channel.
The result is your earnings prospect increases without you having to undertake any additional effort.
On the contrary, you actually get someone to help with the maintenance of your property and take care of the house in a more comprehensive manner.
6. REIT Investment
We already mentioned how you can invest in real estate to generate a passive income source.
But let’s say you want to avoid even the active participation that you need at the beginning of your real estate investment.
You have to undertake research, may even conduct site visits, speak to experts and banks before finalizing on a property.
If you do not want to undertake that much of hard work, can you still generate passive income from real estate?
The answer is yes, indeed you can do it and do it rather efficiently without too much of a problem.
I am sure that you will ask me how?
Well, this is through investing in real estate investment trusts.
Real Estate Investment Trust is an investment instrument that functions pretty much how mutual funds operate in stock markets.
Most times, these funds are managed by professionals just like in the case of mutual funds.
Therefore, you do not have to worry about the exact amount of return from these funds.
You can comfortably enjoy the earnings from this passive source and also draw the benefit of real estate investment.
Also unlike physical real estate, this is not an illiquid asset.
You can sell your interest in REIT any time and take advantage of the funds that you generate.
7. Write a Book
Whether you choose to write an eBook or a conventional printed one, this is undeniably one of the surest ways to generate passive income for a sustainable period.
You must understand that once you have done the initial groundwork and created the basis for the matter, you can pretty much sit back, relax and enjoy the passive income.
If you have written a conventional book, then most times publishers will take forward the entire promotion and marketing initiative of the book.
They would have already discussed the royalty rates with you.
So all you need to do is just let it come to your bank account and enjoy the results.
Of course, the royalty rates are much higher if you self-publish an eBook.
You will have to undertake the promotion initiatives on your own but rest assured to generate a much higher income.
However, a book will be successful only if you have quality content.
Therefore you must remember to maintain high-quality content and make sure you are able to reach out to a much larger number of people.
8. Create Audio Books/Podcast
But what if you have an area expertise but do not have the knack to write a book. Well, it is quite simple.
You have to simply create an audio book and market it just like a normal book.
Put your energy in expanding your expertise and taking it forward in a series of audio files.
You can also create several podcasts and market them on a one by one basis.
The reason why this can become a wonderful passive income source is that once you have sold the audio book, you keep earning the royalty lifelong.
The trick is, of course, how effectively you can market the book or sell your podcasts online.
For the rest of your life, you have to do nothing but enjoy the benefits of this passive source of income.
9. Make YouTube Videos
This is another key passive income venture that you can explore.
This is growing very fast and increasingly becoming a chosen form of generating an income source.
The biggest advantage is it gives you great flexibility.
You can create videos on just about anything from how to cook to how to dance, how to drape apparels to online tutorials to just about anything.
You can even create Youtube videos on movie reviews or even use it as a platform to create stand-up comedy.
Once you have created the video, you need to create a subscriber base.
After that, all you have to simply monetize it by attaching Google AdSense and link your earnings to the clicks that you can generate through the ads.
The reason why it will become a passive source of income is that once you have created a compelling video, you can just sit back and enjoy the earnings that you derive from the subscription and various ad clicks that get converted into buys.
However, if you have to create a sustainable income source, you have to be sure that the quality of the video is great and you are able to sustain your user’s interest without pause.
Now think if you upload a wide number of this kind of videos and let the earnings accumulate, you will soon have a sizeable amount of passive income to depend upon.
Once you have been able to scale it up to a certain comfortable level, you can also give up your day job.
10. Invest in Lending Club to Generate Passive Income
When you are looking out at options to generate passive income, one convenient and modern option would be investing in a lending club.
Needless to mention, this is a particularly safe and promising investment destination.
The fact that it operates pretty much like any lending firm means that once you put your money in it, all you need to bother yourself with is the return that you would earn from it or rather the passive income that you will be able to generate.
Perhaps this is one of the safest investment options to generate passive income, next only to bank certificates and US Treasury securities.
But you must be prepared for the fact that the rate of return will be relatively paltry in this case.
You can at best look to garner 1-2% returns, but you can surely relax and be able to enjoy a passive income source without any hassle.
There is, of course, a new crop of lending clubs that is mushrooming up today.
These Are Web Based and Deal with Peer to Peer Lending Platforms.
The best part is that some of these promise returns as high as 10% and gives you a dual opportunity to grow your money as well as enjoy the passive income.
But one problem is unlike these bank fixed deposits, there is a risk that the loans can go bad.
One simple option is you start investing in a small amount and distributing your investment across multiple loans.
This will make sure that your income source remains intact but at the same time, your relative risk is minimized in case of any specific loan goes bad.
As the old saying goes, the risk involved and the rewards expected are interconnected.
Probably when you are looking out for passive income ideas, this fact gets manifested best.
By diversifying the total income into multiple loans in one go, you are able to limit the risk prospect a lot comprehensively.
At the same time, you are able to keep an income source intact and expect steady cash flow every month.
Though the lending club might not be ideal for risk-averse people, you can surely look at exploring the opportunities they present for a significantly higher amount of passive income for individuals with a relatively higher rate of risk exposure.
The trick is pitching your allocation appropriately.
11. Pay off Your Credit Card Debt
Passive income does not necessarily have to be earning money, it can also be about saving money.
For example, you might have 2-3 credit cards on an average.
Now every card that you have would have a certain amount of outstanding debt.
Have you ever calculated the amount of money that you pay every month as interest on this debt?
Have you wondered how much money you could make if you managed to save that much amount every month as regularly?
Well, there exactly lies the answer to your query about generating alternative income source.
If you can manage to pay off this debt comfortably, then you can easily save the interest every month, and this then becomes a comfortable source of passive income for you.
You just need to save this interest amount as regularly and in an as disciplined manner as you have paid your credit card interest and outstanding amount.
You will be surprised at the extent of the money that you can make this way in just 6 months.
Though unconventional, this can easily be a plausible idea to generate passive income.
12. Photographs to Help Generate Passive Income
This is a particularly lucrative option if you are a photographer.
You can quite easily convert this passion into a passive income opportunity.
There are many websites like shutterstock and istockphoto that will help you sell your photos.
There are various compensation plans like a flat rate or a certain percentage of the total sales figure.
You can click these photographs at your leisure and then sell it to the client site at a convenient time.
The best part is every photograph offers multiple monetization opportunities.
You can generate income several times over from the same photograph.
All you have to do is create a photography portfolio and then cash in on that single idea multiple times.
Once you have uploaded about 100 plus photographs across these platforms, you easily create an opportunity to generate income in a passive manner.
As you continue increasing the volume of photos that you upload on these web platforms, the net earnings from them keep increasing, and you can generate a neat residual income as a result.
Overall, these are income ideas that help you earn from passions and hobbies that you absolutely enjoy.
Another factor that you can completely be sure of in case of this type of passive income source is the fact that there will never be a dearth of demand for photographs.
In fact, as we progress further in the world of technology, visual representations are becoming more and more important.
So there will always be a requirement for genuine and good quality photographs, and hence you can capitalize on that fact to keep earning money.
Moreover, you can keep increasing the number of photographs that you upload as and when you are able to and thus keep increasing the income amount.
13. Take up Equity Share in Business
Often we do not invest in businesses even when we have the ability to fund it because we feel that we do not have the necessary understanding to run the business successfully.
This is because either one might not have domain experience or simply you might not have the ability to shoulder the risk that goes hand in hand with the return prospects in any kind of business.
But don’t worry.
You can still invest in a business and earn the returns from it as passive income.
In fact, you become a passive player or silent partner in the business.
You have just invested a certain amount and are not actively involved in running the business.
But despite that, you get to enjoy the income generated by the successful execution of the business.
In this context, let me specify it can be any type of business from catering to creative content and food to films.
In fact, most times, film producers get to enjoy the profits despite having a rather passive role in the entire deal.
They just produce the film or provide the money required to fund the film.
There are many other similar businesses where you can reap the benefits of being a passive player.
For example, if you help produce a successful music album and it is a roaring success.
The same principle is applied. You are not an active player and a rather passive participant, but at the same time, you get to enjoy the income that you can generate from this source.
Also most times for films and music albums, the passive income generated is pretty much a lifelong affair just like in books.
You can enjoy it many years after the content is officially released.
The Best Way to Generate Passive Income
Now, here is the 13+1 way which is much better than all the other ways I explained above:
We can easily conclude that generating passive income is not difficult if you apply your understanding and invest in the appropriate channel.
You must understand that just having money to invest is not sufficient.
You must understand how much and where to allocate.
After all, this will make sure you can generate a sustainable income that is sufficient for living a comfortable earning.
Also when you are exploring passive income sources, it is important to always look at areas where you have core expertise or passion to drive you.
This is important as it will be able to direct your abilities to generate income better.
Moreover, you will be a lot more confident about optimizing the extent of passive income from the selected channel.
This will mean that you can continue to gain from it over the longer term and if you are considering early requirement, this will be the primary catalyst to decide on a choice.
Now the question is whether the above ways are the best ways of generating passive income or not.
What I Outlined Above Are the Best and Well-Known Passive Income Ways and Ideas.
However, there is a much better way of generating passive income sources that make more money and create more wealth in long-term:
- Establishing a reliable and strong source of income.
- Investing a portion of your income in currency, stock and real estate markets to (1) increase your wealth and (2) generate passive income.
When you have more money, it is much easier to generate sources of passive income that make more money and increase your wealth at the same time.
For example, you buy real estate properties and then you rent them.
You make passive income through rent and at the same time the value of the properties will appreciate as the time goes by.
This is the best way to generate passive income.
However, there is another question here: How can we establish a reliable and strong source of income?
You have to have a business that makes enough money that not only covers your expenses, but also it leaves enough money for you to enable you to invest in currency, stock and real estate markets.
Your business has to be scalable, so that it makes more money every month/year.
If you have such a business, then good.
If not, you have to think about creating it seriously if you are serious about creating passive income and achieving financial freedom.
That is the only way of getting rich and richer.
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