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Inflation is increasing by the day, and with incomes not reflecting a growth rate to match the rising costs, many people are working overtime or are looking for additional sources of income to meet their rising financial requirements. If this sounds like something you’re facing too, here’s some good news — there are many ways to set up a passive income that you can rely on. All you need to do is figure out where to invest your money to earn regular passive income.
If this sounds like something you’re looking for, here are the top 6 passive income investment options you can choose from.
1. Dividend paying stocks
This is a good option for aggressive investors who are looking for a passive source of income. Dividend stocks are essentially equity stocks of companies that frequently pay dividends, which are a portion of the profits earned by the company. This portion of the profits is distributed to the company’s shareholders on a periodic basis. Most dividend stocks pay out dividends on an annual basis, but some companies may also offer interim dividends.
In case you can afford to take on some risk in your portfolio, you can invest in the top dividend stocks in the Indian market. Most of these stocks belong to established companies, and are not as volatile as the stocks of growing companies.
2. Fixed deposits
On the other end of the spectrum, we have fixed deposits. These are ideal for the conservative investor, who wants to prioritize capital preservation while simultaneously securing a secondary source of passive income. You’re undoubtedly familiar with fixed deposits or FDs as they’re more commonly known. Here, you can invest a lump sum amount and opt to receive interest payouts on a regular basis, such as monthly, quarterly, semi-annually or annually.
The rate at which the interest will be offered is predetermined, so you know exactly how much you will earn over the course of the investment tenure. This certainty can be reassuring for conservative investors.
3. Rental income
This is a great option if you already have a house property in your name that you don’t use. A spare property can be rented out to generate reliable rental income each month. Depending on the location of the property, you can rent it out for residential or for commercial purposes. The rent that you receive each month can complement your income or replace it passively. In addition to this, there is the added advantage of increasing rental prices each year.
So, with a rental property, you can almost always expect a rise in your passive income over the long term. All the while, your original capital, although locked in, will always be safe. And you can always sell the property at a later point and reinvest the funds if needed.
4. Real Estate Investment Trusts (REITs)
If you do not already own a property, you may not be able to set up a trusted source of rental income. But the real estate sector has something else to offer you in the form of REITs or Real Estate Investment Trusts. REITs work like mutual funds that invest in real estate. The portfolio of REITs typically consist of commercial properties or high-yield premium residential properties.
The net income from these trusts is distributed as dividends to investors. So, in a way, they work like dividend-yielding shares too. You can invest in REITs to enjoy a steady stream of income from the trust.
If you’re looking for some steady extra income to supplement your primary income, or if you want to set up a source of retirement income, these investment options may be some choices for you to consider. You can start by including one or two of these options in your portfolio, and then build it up from there.
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