Investment funds
Startup investments
Dividend stocks
Bonds
Buy a website
Buy a local business
- Investment funds
Investing in funds can be a smart way to build lasting wealth while minimizing risk. Products like mutual funds, index funds, and exchange-traded funds (ETFs) allow you to pool your money with other investors to buy a portfolio of stocks. This diversification helps reduce the risk associated with individual stock investments.
Index funds like the S&P 500 track specific market indices, providing exposure to a broad range of companies. Mutual funds are managed by professionals who select the underlying investments, while ETFs trade on stock exchanges in the same way as individual stocks, often with lower fees.
S&P 500 index. S&P 500
How to start: Open a brokerage account with a registered financial institution. Research different funds to understand their strategies and performance, and consider consulting a financial adviser.
How much does it pay? Over the past 20 years, the average annual rate of return of the S&P 500 index has been around 10%.
- Startup investments
Investing in small and medium-sized businesses has become more accessible through online platforms. With a low initial investment, you can fund the next unicorn founder.
Potential returns range widely based on a business’s performance and broader market conditions. It’s important to remember that all investments carry risks, including the possibility of losing your initial investment. Know your risk tolerance and consult with a financial advisor to clarify potential outcomes.
Before putting your money into a business or other type of investment, ask yourself these questions about the products and people you’re planning to fund.
How to start: Funding platforms like StartEngine, Crowdcube, and Fundable have vetting processes to evaluate businesses before they become available for investment. Conduct your own research of vetted funding proposals to make a well-informed decision.
How much does it pay? Earnings from startup investments vary widely, with many providing no returns at all.
- Dividend stocks
Investing in dividend stocks is a traditional way to earn passive income. These are shares in companies that pay a percentage of earnings, typically quarterly. This means you can generate income from a company’s profits, as well as the stock appreciation.
How to start: Research and select reliable companies with a history of paying dividends, then open a brokerage account to start purchasing shares.
How much does it pay? Dividend yields vary by industry. For example, average yield for oil and lumber stocks is 4.92%, while tech stock dividend yields average 3.2%.
- Bonds
Bonds are another investment strategy for generating passive income. When you buy a bond, you’re essentially lending money to the government in exchange for interest payments.
Bonds are lower risk compared to stocks and can provide a steady income over time. You might also consider bond funds, which pool various bonds together to diversify and reduce risk.
How to start: Investigate types of bonds available to you, such as municipal or corporate bonds, and consider purchasing through a brokerage.
How much does it pay? Bonds generally offer returns between 2% to 5% annually.
- Buy a website
Websites on almost any topic often are put up for sale. The best part? A lot of them make a healthy income through affiliate links, ads, memberships, or product sales.
Buying an existing site is one way to own a business that already has sales and traffic coming in. Once you complete your purchase, you likely will negotiate hand-over terms with the seller to ensure you’re able to maintain the website.
How to start: Browse website marketplaces like BizBuySell and Flippa to get an idea of availability and pricing. Also, consider how you will negotiate a sale price when you find a website you’d like to buy.
How much does it pay? While many factors contribute to a website’s profitability, a generally accepted rule says websites are bought for two or three times their annual profit. This means you should expect to see a return on investment within a few years.
Reference: https://www.shopify.com/in/blog/passive-income-ideas