Building Passive Income Streams
Unlocking Financial Freedom
Every content distribution platform has sowed the need for immediate validation deep into our psychologies. While some have the power to harness it as a driving force, most have fallen prey to its perils. There is a flood of people teaching everyone how to earn quick money. It is impossible that you’ve never been hit by a video where you spend 30 minutes on a site daily and land your golden ticket to retiring early and becoming your boss.
While we can go on and on about judging/demystifying the nuances of content, I’d like for us to focus our energies on learning something more concrete. We will focus on making money work for you in the truest sense. The idea is to start small and then let it multiply with patience and time. Let’s talk passive income streams without having to learn a new skill or a massive time and money investment.
Passive Income Types
When thinking of making your money work without an extra hop of fuss, there are these two modes you can rely on to get the money drip to your portfolio started.
- Interest income: Interest generated in the amount invested
- Dividends income: Companies distribute a share of their earning to all shareholders when they have a surplus in the net income.
Famous Instruments for Passive Income:
- Fixed Deposits: From time immemorial FDs have been a favourite due to their low risk factor and assured returns. Just that the returns might be very low ranging between 5–7% depending on the tenure you pick. Not my favourite choice and here’s why.
- Rental Income: To generate rent, you’d need real estate to start with and then there is all that overhead of upkeep, finding the right people to rent out to & dealing with more and more people. That is hardly passive. Exactly why you need to invest in real estate, not have or buy one. Read about REITs here. In addition to the rental income, you will benefit from the real estate’s appreciation of these REIT units with zero overhead.
- Equity/Debt Investments: Returns on your investments are the most obvious answer to generate interest. Debt instruments bring lower risks and give lower returns compared to equity. If your money needs are not immediate and you can afford to stay invested for a minimum of 5 years, equity should always be your go-to. Depending on your risk appetite, you can decide which band of the market you invest.
- Bonds: Another infamous and reliable form of debt investment is bonds. You need to be careful while selecting the bonds you are putting your precious buck in and usually, it’s a good practice to not stoop lower than A/A- rated bonds. The foolproof method is to go for government-issued bonds, also called Sovereign bonds. One such great opportunity is to invest in Sovereign Gold Bonds.
- Smallcases: Finally comes the guy I’ve been so eagerly waiting to mention. Smallcases are nothing but a bucket of stocks of companies. Each bucket addresses a very specific use case and the curation of stocks is done by people experienced in the field. While smallcases cater to a broad spectrum of use cases, I wanted to give a special highlight to the Dividend or income-generating buckets. While mutual funds have the option to be of type dividend paying, they don’t assure certainty of dividends. These smallcases on the other hand are picked keeping dividend income primarily in mind. You can find them here.
The best course would be to allocate some amount every month for setting up your passive income streams and equally distribute them among avenues you find best fitting.
Always read before you invest, ask questions. It is not rocket science. The market wants more and more of your money to come and get invested & systems are being made conducive for retail investors like us to make the most of it.
Make it a habit. Do it every month.
If you have money earned from hard work, you better make it work.
Here’s some inspiration and a sneak peek into what these drips look like.
Take those baby steps today and let them grow into your support system of tomorrow.
