“Passive income” is the term used to describe any amount of money you must put in minimal or no effort to earn. Let’s dive a little more into the meaning of passive income in terms of a simple definition and discuss the various methods to earn it.
In this article, we will look at some of the top passive income options for Indians. It is interesting to note that you could be able to generate passive income using various methods.
Before we discuss various ways to earn passive revenue, let’s go deeper into the concept of is meant by passive income in basic terms.
What Is Passive Income?
Passive Income is defined as income that requires very little effort to earn. Passive income is an idea that is growing in popularity, and many people are trying to earn passive income.
What passive income is basically is the ability to earn regular income by putting in many hours of intense effort in a short amount of time. The definition of passive income for the majority of Indians However, it is rental income or partnerships, as well as businesses in which there isn’t any intense work.
Ideas for passive income
There are numerous types that passive income that can be earned. Here are a few of the most effective ideas for passive income:
Idea 1: Rental Income
owning property, land and even storage spaces could be a fantastic method of earning passive income. Many landlords become landlords.
This means that you have to work hard to get the cash needed to purchase the first rental property you own.
It is not an easy decision given the current economic conditions. Additionally, there’s only a tiny amount of liquidity in the real estate market. It’s not the quickest or the most secure route to passive income.
Risk: Moderate. You could be at risk of selecting a location that is not suitable or the property being unrented for long periods or other issues.
Reward: Moderate. The median property growth rate in India is set at 5.4 per year, since 2016.
Timeframe: Long-term. A house purchase can take several years if not even several decades.
Idea 2: Mutual Funds
Mutual funds are one of the most effective ways to earn passive income. You can pick mutual funds according to your level of risk and timeframe.
This means that you don’t just gain wealth passively you also have the option of choosing the amount of risk you are willing to accept. If you’ve got a skilled professional who can assist you in this process, you can create the ideal portfolio to achieve your financial objectives.
High to High. You can select funds that are considered to be low risk as liquid funds, or as extremely risky as funds from international sources.
Reward High to low. In the past, mutual funds produced between 4 and 16 percent returns in India.
Timeframe Medium to Long-Term. Generating significant amounts of passive earnings from mutual funds usually requires minimum of 3+ years.
Idea 3: Stock Investments
It is also an excellent method of creating passive income. This is, naturally an activity that requires certain levels of knowledge and expertise. While stocks may provide a substantial amount of passive revenue, it’s ideal to make investments in stock with the help of an experienced advisor.
Risk: High. If you do not have a skilled financial advisor on your side the process of picking stocks can require hours of study and frequent adjustments based on your financial goals as well as market trends.
Reward: Moderate to High. There are stocks that pay dividends that are believed as being among the most reliable source of income that is passive.
Timeframe: Long-term. Historically speaking, stocks that are solid with solid fundamentals have proven lucrative for five years or more.
Idea 4: Peer-to-Peer Lending
P2P lending is essentially an alternative investment route. It is basically a way of lending money to borrowers and making an interest rate on top. It is recommended to invest in P2P lending with an experienced mediator. In this way, you can invest in money however you reduce the risk that comes with P2P lending. This is by an enormous margin.
Risk: Moderate. Cube’s partners in P2P LiquiLoans Faircent and LiquiLoans Faircent can be RBI Regulated as well. LiquiLoans has the distinction of being the first P2P service to be assessed by an agency for credit ratings (CRISIL).
Reward: Moderate. P2P lending with Cube Wealth can generate up to 12% return with recurring payments that can be an opportunity to earn passive income.
Timeframe: Short-term. P2P loan plans vary between 3 months and 3 years, on average.
Idea 5: Asset Leasing
Asset leasing permits you to make passive earnings. You can be an investor that leases out tangible assets such as vehicles furniture, and tools or intangible assets such as copyrights.
As a Lessor, you’ll earn an amount of interest (passive income) together with an amount principally paid by the lessee for the term that the lease is in effect.
Risk moderately high. Cube’s partner Grip guarantees that all leasees have been thoroughly checked and are creditworthy and vetted.
Reward High but moderately. Asset Leasing through Grip can yield as much as 12% after-tax return for Cube which earn passive earnings, in the form of monthly payments.
Timeframe: Short-term. The lease plans of asset leasing can range from 11 months up to 2 years on average.
Idea 6: Bank Fixed Deposit
This is among the oldest methods to earn passive income. The return on investment from the Bank FD is not that high. However, those who are very cautious tend to favor bank FDs because of the low-risk factor.
Risk: Low. Fixed bank deposits are generally thought of as low risk because they offer guarantees for returns.
Reward: Low. Bank FDs have been generating about 4-6% return at the very best.
Timeframe: From short to medium length. FD plans vary between 12 months and 3+ years.
More Passive Income Ideas
Idea 7: Start A Business
This idea of passive income generation is a long-term strategy. The process of starting a business will require the effort of working hard until your company is operating on autopilot.
If the company does not require you to be actively involved in it, it could become an income-generating source for you via dividends, bonds, stock, and so on.
An interesting statistic is that around 25% of businesses last for at least 15 years. Beginning your own business offers the potential of earning you unlimited cash. However, the risk is very high.
Risk: High. The process of starting an enterprise and being successful and profitable isn’t an easy job.
Reward: From low to high. There are many businesses that may not be a million-dollar company however, they could help you achieve financial success.
Timeframe: Long-term. Businesses typically require that you do the work for five or more years.
Idea 8: Invest In A Business
Being a serial investor comes with benefits. The money you invest in a company could earn you passive income via dividends, debentures, royalties, etc.
In the same way, you need to rely on the business to be successful and provide consistent results and growth. There are risks associated with this that angel investors are aware.
Risk: High. Some might say, is more difficult than picking a great company.
Reward: From low to high. Venture capitalists are known for winning certain things and losing others however when they do win the reward is usually profitable.
Timeframe: Long-term. It usually takes time to make a profit from venture capital investments.
Idea 9: Become An Influencer
One of the most straightforward passive income options is to be an influencer. The three main pillars of influencer marketing include content creation developing relationships and an influence on social networks.
But, not everyone is able to become an influencer. You must have a large number of social media followers as well as an extremely high rate of engagement among your audience, in addition to other things.
Risk: Low to High. Certain people might need to spend an enormous amount of effort to achieve the status of an influencer, which may mean taking on a risk like giving up a full-time job.
Reward High to low. The influencer market is a tricky one and not everyone is able to score significant partnerships and sponsorships.
Timeframe Long-term to medium-term. If you’re not a quick success being an influencer requires quite a long time.
Idea 10: Become An Airbnb Host
The same problems arise in generating passive income from renting a property. However, being an Airbnb affiliate can bring benefits.
In the role of the Airbnb host, you have the ability to decide on your own rate and post your home on the site for free. Airbnb also offers host protection programs that guarantee an insurance policy of $1,000,000 for damage (in specific countries).
Risk: Low to High. The risk starts with finding an appropriate property and then identifying the appropriate guests.
Reward: From low to high. Variations in the seasons could be a factor in earning from Airbnb.
Timeframe: Long-term. The process of paying off loans and profiting from any real estate investment is known to take time.
Idea 11: Invest In An Asset That Pays You An Annuity
Following an initial lump-sum investment An annuity plan will give you a steady income throughout your life. You can select from various annuity plans such as Immediate annuity plans as well as Deferred plans. It is crucial to select the correct annuity plan.
Risk: Low. Both private and government players are known to offer numerous options, which may be confusing, and difficult.
Rewards: Low to moderate. The amount you earn is contingent on the plan type you select.
Timeframe: From short to long-term. Annuity plans begins on the first day, while other plans include a vesting period.
How Many Sources Of Passive Income Should You Have?
Financial independence is the final purpose of creating many streams of income that is passive. The conventional wisdom says that investors focus on investing in at least seven different assets that could produce passive income.
But, this isn’t something you can do quickly. It takes time and careful planning to establish numerous streams of income that are passive.
It is possible to start by looking at the ideas for passive income below for suggestions. Many investors begin with mutual funds or stocks as their primary sources of passive income. Some investors are known to save money and invest in an investment property, such as a house that can provide rent each month.
Make sure to speak with a reputable financial advisor to determine what you can expect in the investment in sources of passive income.