Passive investing is a method that continuously generates income without the investor having to constantly check their holdings.
It can be a very successful strategy, as well as a dangerous one if you don’t know the right places to invest.
If you’re a passive investor who wants to increase the size of that all-important savings account, you’re probably wondering how often you need to check on your portfolio. With all the other things going on in your busy life, you’d probably prefer not to worry about it.
If you feel stressed checking your portfolio every day, a hands-off approach where you only need to check once a month or once a quarter might be the best option for you.
Here are a few suggestions for smart passive investing strategies:
Invest in the Right Markets
For smart passive investing, the first thing you’ll want to consider is investing in stable markets, explains Toronto financial entrepreneur, Gary Ng.
Gary Ng gives a few examples of places to start for safe investing in industries that don’t require daily maintenance of your stock portfolio.
Although there have been some fluctuations of real estate markets in recent years, it continues to be a top choice for investors who want to create long-term returns for their portfolio.
Rental properties could help apartment owners by providing a steady source of income, but if that doesn’t work for you, real estate investment trusts (REITs) are another option. They pay 90 percent of taxable income as dividends for their investors.
A third option is real estate crowdfunding. Investors can choose between equity or debt investments in residential and commercial real estate properties. Crowdfunding also allows investors to receive the tax benefits of direct ownership.
This is one of the easiest ways investors can generate passive income. A portion of the earnings from public companies are funneled back to investors in the form of dividends. Those investors can then choose whether to keep the money or reinvest it.
The yields of these dividends fluctuate from one company to another and also change each year. If you’re uncertain what dividend-paying stocks to choose, try to use the ones that adhere to the dividend-aristocrat label. This means the company has a two-decade-plus track record of paying out substantial amounts. If you’re not familiar with these concepts, the MNYMSTRS financial literacy course will provide you with a more in-depth look into markets, investing, and finance.
This industry has grown very quickly over the last 10-plus years. It’s defined, more or less, as directly lending money to a business or individual when the borrowers and lenders connect through online platforms.
Returns for this type of investment range from 7 percent to 12 percent. There’s not much the investor needs to do after funding the initial loan.
These P2P programs have fewer barriers to entry than many other kinds of investments. For just $30 or less, investors could finance loans. Each P2P platform does have its own set of rules and requirements, so make sure to check those before moving forward with your investment.
These are mutual funds connected to a specific market index. The goal is to reflect the performance of the underlying index that they’re tracking. They are managed passively. That means the securities don’t change without a shifting composition of the index.
That means lower management costs and turnover rates, which makes them tax-efficient and easier to manage than many other investment options.
Passive income investments should be a part of any investor’s portfolio. They can simplify your investing in general while granting long-term benefits.
There are different levels of risk for each of the options mentioned above, so it’s still important to assess the expected returns against the possible losses. Even with passive investments, a little time and attention goes a long way.