We all want to work less and enjoy our hobbies and passions, but it can be hard to find a way to do this. Enter passive income investing, an excellent option for many reasons. It can provide individuals and families with the means to lessen their workload while still having a steady stream of income coming in.
A passive income investment is essentially when the dividends or interest on the investment provide the investor with a steady stream of income with minimal effort or continuous management of the investment itself. As an investor, you provide the initially invested amount, either time or money, and then the investment will mostly manage itself.
Unlike the famous song about war and what it’s good for, passive income is good for many things and people. A passive income can be ideal for those who have irregular paycheques, for those who wish to retire early or at least work less, and especially for those looking towards retirement. A passive source of income is great for retirees and can even be the money they live off of month to month if the amounts paid out are reliable enough.
Not all passive investments are suitable investments, so you must do your due diligence. As with any investing, diversifying your portfolio is vital for protection against market fluctuations and unforeseen problems.
There are a lot of ways to make a passive income thanks to the internet. Some would consider recording and selling an online course or building an app a kind of passive income stream. When it comes to passive income investments, these are just some of the best avenues to consider:
This is one of the most popular forms of passive income investing. As a company makes a profit, the investors that own shares are paid out dividends. A dividend can then be reinvested into more shares or taken as cash. When you reinvest dividends into a reputable company with a proven long-term performance of dividend payouts, you grow your passive income amount. Over time, these dividends become your passive income, and you continue holding ownership of the company shares.
An index fund is a type of mutual fund that offers investors the chance to diversify their portfolio. It’s able to do that because the fund itself is stretched across many businesses in different markets and sectors. This large scale diversification mitigates risk while making it affordable to the individual in the same way that mutual funds do. The big difference is that index funds focus on a particular market index and tend to have lower fees, thus costing you less money.
Real estate offers many forms of passive income. In the conventional sense, there’s the sweat equity of owning a home and fixing it up to add value while the market naturally increases the property’s value. Many people choose to invest time and money by owning rental properties. A great way to invest in real estate without having to own and manage the physical property is through mortgage investments. A mortgage investment corporation (MIC) allows investors to pool their money together and invest in several real estate projects for diversification of the investment. The interest charged to the borrower is then the money earned by the investor.
Peer-to-peer lending (P2P) is a newer form of investment strategy. This form of investing can carry risks associated with defaults on the loans themselves, but it’s straightforward to get into with little start-up capital needed. For investors willing to take chances on borrowers who are more considerable credit risks, the returns can be higher due to the interest charged on the loan itself.
A Certificate of Deposit (CD) is a method of investing through banks or credit unions. This works based on an investor agreeing to leave a large sum untouched for an agreed-upon amount of time. A CD ladder is a method in which investors make sure that these time constraints aren’t long-term and subject to large-scale market fluctuations. By stacking CDs on top of one another, when one CD matures and pays out, another can be bought at a different interest rate depending on the market.
There are a lot of ways to develop a passive income in your life, the biggest benefit being that it’s passive. By remaining mostly hands-off, the investor is free to pursue other interests in their life while collecting a steady stream of income from their investments. As with any form of alternative investment, diversification is key to the success and safety of a strategy. The more risk-averse you are, the more diversification you should look for.
Interested in learning more about how a well-structured and diversified mortgage investment can help you reach your passive income goals? Get in touch with Jordan on our team today and see what putting your feet up feels like when it comes to your investments.
19 Sep, 2024
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Since 1994, Cooper Pacific Mortgage Investment Corporation has been helping communities and investors across Western Canada grow and prosper. As real estate experts, our goal is to offer investors outstanding mortgage investment opportunities with an attractive rate of return. We do this by offering short-term construction financing and interim mortgage funding to help builders and developers take projects from planning to completion.
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