The word ‘Passive’ has somewhat negative connotations, generally meaning something submissive or lacking energy. However, when it comes to ways to generate income, steps taken to generate passive income can be your best friend. If for any sudden reason, there is a challenge with your current active income source, passive income can help you sustain the difficult period. When the active income opportunities are restored, passive income nicely augments your overall wealth and gives you financial security.
For generating passive income, we need to shell out an upfront investment into an idea that has the potential to generate significant income at an acceptable risk. One has to put in some quality time for research and risk assessment. But the principle is that post-investment the idea should require no or minimal effort from our side to keep the gains coming. Sounds too good to be true? Under proper guidance, it does indeed work.
For most of our lives, we are working for money. Let us examine how we can put our money to work, for us!
Smart Idea 1 – It is all about dividends!
Identify organizations with a CONSISTENT record of paying dividends to their stockholders. Research the sectors that these industries operate in and also evaluate any current and potential risks before investing. It is advisable to pay a small consultancy fee and discuss your ideas with proven experts in the field.
This method will initially require some time commitment as well as significant capital requirements. However, it has great potential to provide good returns if you want to boost your income generating assets over a long time with minimal ongoing effort.
Smart Idea 2 – Outsource the analysis!
Scared after reading about the high percentage of retail investors who lose money in the market? Do not despair! Simply outsource the research and analysis part to the experts who run the exchange-traded funds (ETFs) or Index Funds. These nice folk are the people who track the performance of various market indices like NASDAQ and NIFTY. Investments in ETFs can usually outperform traditional investment options like fixed deposits. They are a good solution to beat the ever-increasing inflation.
Compared to idea 1, this option requires even less of your time on an ongoing basis. However, like the first idea, it is vital to identify good ETFs before you invest your hard-earned money.
Smart Idea 3 – Feeling dumb? No worries, artificial intelligence is here to help!
The more u speak to friends and relatives, the more confusing it gets when it comes to selecting the best investment ideas. Humans are susceptible to emotions and biases. Thankfully, machines are not. We, humans, have smartly built machines that work on pure, cold logic. Having said that, there are now people working on imparting emotions to robots, but we can discuss that some other time.
Thanks to lightning processing speed and pure logic-based algorithms, computer programs can identify trends and select the best possible trade options in a rapidly changing market. Many digital platforms offer these capabilities to retain investors and participate in robot-assisted trading/investments. Due to its scale and automation, these platforms can offer services at a lesser fee than your personal, human investment advisor and they boast of accurate trades, well, most of the time.
Accounts on such platforms can be opened with small amounts and can even be accessed from your mobile phones. The risk is comparatively less and the rewards can be better than traditional investing.
Smart Idea 4 – Obtain contributions from the community!
A recent entrant to the passive investing market is crowdfunding. As the name suggests, you are part of a crowd that invests in certain assets, say real estate. The advantage here is you are investing a small amount to part-own an asset that would cost a huge amount if you were to purchase it single-handedly. The funds from groups of people are pooled together to acquire, improve and manage properties, mostly commercial properties. The income from such properties, be it in terms of rents or from price appreciation, is distributed proportionately amongst the investors. As opposed to buying and renting out properties, the time and effort we must invest in managing the renting out, maintenance etc. is practically none. Another advantage is that the investment is backed by your share in an actual physical asset, offering some security.
Keep in mind that this is a relatively new investment vehicle and some risks are involved, same as any other investment idea.
Smart Idea 5 – Sell that knowledge!
If you possess a specialized skill that is in demand, invest some money in creating an online class/tutorial on the subject. You can host these tutorials or videos on some popular e-learning platforms and earn money every time a user subscribes to them.
During the peak pandemic times, the preferred and sometimes only option for learning was e-learning. Most colleges and schools offered remote learning. Some of the private tutors were smart enough to establish an e-learning presence and capitalize on the trend.
Now that the pandemic is almost over and life is slowly returning to normal, people will keep using remote learning platforms, particularly if you can share knowledge on trendy subjects. A well-made, professionally edited e-learning video can keep generating good income for you for a long period.