We’re currently seeing historically high unemployment rates and stock market volatility. Notably, our full-time jobs and 401k plans may not be enough to secure our financial futures.
There are many income-producing assets you can invest in to earn passive income now while building long-term wealth.
Having multiple income streams can reduce stress from your life and let you make money in recessions and bull markets.
List of Top Income-Producing Assets
Here are several ways to invest small amounts of money into a variety of asset classes that can earn long-term profits.
You may already make money from some of the passive income ideas. It’s possible to discover a few other alternative assets that can expand your portfolio.
1. Interest Savings Accounts
Interest-bearing savings accounts might be boring but are an effective low-risk way to earn passive income. Instead of leaving your money in a high-fee bank account, your cash can earn interest.
Most online banks offer free accounts, so you don’t pay the bank to keep your cash.
CIT Bank offers three different interest-bearing savings options:
- Premier High Yield Savings
- Savings Builder
- Money Market Account
Each of these account options has a $100 initial deposit and have varying interest rates and account perks.
The Savings Builder can be an exciting way to save small amounts of money as a minimum recurring $100 monthly deposit lets your savings earn an interest rate boost.
As bank interest rates are lower than the annual inflation rate, you should invest your long-term investments in assets with higher growth potential.
Savings accounts are a good place to park your cash when researching new investments or plan on accessing within the next few months.
You can read our full review on CIT Bank here.
Why we like it: Your cash earns interest, instant access for large bills or better investments
2. Certificates of Deposit (CDs)
Savings accounts offer easy, penalty-free access to your cash, but the interest rates are lackluster. A bank certificate of deposit can earn a higher yield with low volatility.
The best CDs usually require a minimum $1,000 deposit with a 12-month term (or longer). Most CDs charge an early withdrawal penalty if you tap your cash before the term ends.
CIT Bank offers no-penalty CDs with an 11-month term and a $1,000 minimum opening deposit. Your interest rate can be competitive with similar term traditional CDs that charge early withdrawal fees.
Why we like it: Potential higher interest rates than savings accounts, short investment terms
3. Dividend Stocks
One benefit of investing in stocks is the ability to earn dividends that you can reinvest. In retirement, the dividend income can help pay your bills instead of selling stock.
A dwindling portfolio value means your remaining balance can earn less compound interest.
Not every individual stock pays dividends such as technology companies with plenty of upside growth potential. Well-established businesses like consumer staples, utilities or real estate investment trusts (REITs) are more likely to pay dividends.
If your portfolio holds an S&P 500 index fund, you already earn some dividend income. The S&P 500 dividend yield is 1.82% in July 2020, according to YCharts.
Your portfolio value can increase if the index fund share price appreciates long-term.
You can also buy dividend-focused ETFs and mutual funds from most investing apps. These funds tend to hold stocks with the highest dividend payouts in various sectors.
Why we like it: Can earn regular dividend payments, stocks are highly liquid
4. Bond Funds
Another way to earn dividends is by investing in bonds. The best way for most people is to buy investment-grade corporate and government bond index funds. You can buy these funds in your 401k, IRA and taxable brokerage accounts.
Bonds tend to have lower long-term growth potential but are also less volatile than stocks.
As a bondholder, you lend money to a company instead of buying stock shares as a shareholder. If the company goes bankrupt, bondholders get paid before stockholders.
Most retirement planners and robo-advisors recommend that younger investors own some bonds.
For instance, a 20-year-old might hold 90% stocks and 10% bonds. However, your exposure to bonds increases as you age. Before you retire, you may have 60% stocks and 40% bonds.
Why we like it: Less volatile than stocks, potentially higher yields than savings accounts
5. Small Business Bonds
Most corporate bond ETFs only invest in large companies. Small business bonds can also be one of the best income-producing assets for a short-term investment strategy.
Worthy Bonds offers 5% fixed annual returns for each note. You can buy Worthy notes in $10 increments with a 36-month term. There are no fees to buy or sell bonds–even when you sell them before the three-year maturity date.
This passive income idea isn’t risk-free, although each Worthy backs each bond with physical collateral to reduce your downside risk. If the borrower defaults, your investment most likely won’t be a total loss.
Why we like it: Fixed 5% annual return, no fees and a low minimum investment
6. College Savings Plan
Do you plan on helping pay for your children’s college education? You can invest in stock and bond ETFs with a 529 college savings plan. Each contribution can grow tax-free, so you don’t have to declare the interest income each tax year.
Your child can withdraw these funds tax-free for most higher education costs. Tuition, off-campus housing and textbooks are qualifying expenses.
You might be able to deduct your annual contributions on your state income taxes.
Why we like it: Contributions grow tax-free, covers many higher education costs
7. Health Savings Accounts
Most of us will have an expensive medical bill in the future. One reason to own income-producing assets is to pay for life’s inevitable expenses. A health savings account (HSA) is a valuable way to make tax-advantaged investments.
Your HSA contributions are tax-deductible and reduce your taxable income. The investment income you earn is tax-free in most states. Your withdrawals are tax-free for most medical expenses.
You qualify for an HSA if you have a high deductible health plan. In 2020, singles only need a minimum deductible of $1,400, and family plans are $2,800.
Also, you must not be on Medicare or a dependent on another person’s tax return.
Why we like it: Tax-deductible contributions, tax-free withdrawals for most medical costs
8. Crowdfunded Real Estate
Until a few years ago, the only way to invest in real estate with small amounts of money was through real estate stocks and public REITs. These funds can earn steady dividends, but stock market volatility can impact the share price.
Crowdfunded real estate lets you directly invest in multifamily and commercial real estate with small amounts of money. You can earn annual returns of at least 5% that’s competitive with the average annual S&P 500 stock market with less volatility.
However, most real estate platforms require a minimum 5-year investment period to avoid early withdrawal penalties.
Multi-year investing periods help you earn potentially higher returns than only investing in stocks.
Top real estate crowdfunding platforms to consider:
Groundfloor takes a different investment approach than most real estate platforms. You invest at least $10 into fixer-uppers in US cities with a 12 to 18 months loan term. The average investment return is 10%, according to Groundfloor.
Each project has a risk rating between A and G. Grade A loans are the least risky offerings and can earn a minimum 5% return.
Fundrise invests in multifamily housing and commercial properties across the United States. Investors from all 50 US states can invest with Fundrise even if you earn a small income.
You can start investing with a minimum $500 starter investment. This minimum is one of the lowest for crowdfunded real estate. Investing at least $1,000 lets you choose an advanced investment strategy that will focus on dividend income or long-term growth.
The advanced Fundrise Supplemental Income plan emphasizes dividend income. Its current annual dividend yield is 4.98%, which is higher than most public REITs. You also earn some “equity income” when Fundrise sells properties that grow in value.
Aggressive investors may decide to invest in a Long-Term Growth plan. This strategy earns minimal dividends, but the potential annual returns can be above 10% if property values increase.
RealtyMogul offers two non-traded REITs with a $5,000 minimum investment. MogulREIT I focuses on debt financing to earn dividends from commercial and multifamily properties. Consider MogulREIT II to only invest in multifamily properties.
Accredited investors will appreciate RealtyMogul for its exclusive offerings. Having a high net worth of at least $1 million or an annual income above $200,000 allows you to invest in individual properties. You can swap investment properties with RealtyMogul using a 1031 Exchange too.
Why we like it: Low investment minimums, steady dividend income
9. Rental Properties
Rental properties are another real estate investment that can produce consistent income. You might decide to buy a single-family rental home. A duplex can be good, too, as the monthly rent from one side can offset a vacancy in the other half.
Owning a local rental property can be helpful if you plan on self-managing your unit. Roofstock can help you find real estate in cities across the United States when your local market isn’t a good fit.
You might also use Roofstock to diversify your current rental property portfolio.
Rental properties require a more considerable investment than crowdfunded real estate. However, your potential investment returns can be higher, and you own the entire property.
Why we like it: Local investment options, own physical property, earn monthly income
10. Own a Vacation Rental
Fewer people are traveling as we stay home and follow social distancing guidelines. However, many who go overnight prefer vacation rentals to hotels for extra privacy.
If you need money now, consider renting your basement or a second property. The best vacation rentals in 2020 let guests have their own kitchen and living space.
Avoid sharing common areas to help most travelers feel at home and more likely to leave a positive review.
Listing your property on Airbnb is one of the best ways to secure guests and earn recurring income. Airbnb has a calculator to predict your monthly earnings.
Being an Airbnb host gives you more flexibility than being a full-time landlord. For instance, you can choose which dates guests stay at your place. In some cities, short-term rentals can earn more per month than long-term rentals.
Why we like: Vacation homes are popular, and might make more money than long-term rentals.
Investing in farmland might sound boring, yet it can be one of the best income-producing assets. You don’t have to come from a family of farmers to build wealth from this asset. It’s possible to lend money to farmers who do all of the dirty work.
AcreTrader lets accredited investors buy shares of active farms in the United States. You can make money from annual rent payments the farmer pays and increasing land values.
Some of AcreTrader’s recent land offerings grow these cash crops:
Each offering lists the potential rate of return and estimated ownership duration. Be aware that this asset can require more cash and a longer investment commitment than other assets. Most offerings have a minimum investment above $15,000 with an ownership period between three and ten years.
Why we like it: Collect annual rental income, invest in multiple crops
Owning timberland is another way to earn passive income with real estate. You can hire logging companies to thin your forest periodically, and you earn income from the tree sales.
Before buying the first wooded lot you see for sale, have a tree surveyor inspect the land. Lumber companies have strict quality standards. You may need to plant new trees that can take between 20 and 30 years to mature.
One advantage of owning undeveloped land is that it can be easier to sell than developed properties. The new buyer might build a house on it, keep it for timber or use the land for hunting, for instance. Selling for a profit is a second way to make money from raw land.
13. Mineral Rights
Speculative land investors can purchase mineral rights to earn investment income. Sometimes, what’s underground is more valuable than what you can build, farm or log.
Buying mineral rights lets you collect royalties from the drilling or mining company. Oil and gas royalties are the two most common mineral rights in the United States. You might also find rights for copper, coal and precious metals.
It’s possible to buy mineral rights online. This investment idea may require more due diligence than investing in other physical assets.
The mineral rights law will vary by state and locality. Some states prohibit specific mineral extraction processes, such as “fracking.”
You should consider hiring a lawyer to help you assess the current laws and draft a legal contract. Having a geologist survey your land tract can be well worth the cost as well.
If you prefer to flip land for a quick profit, you can buy a property with mineral rights. Then, you can sell it to a buyer willing to start extracting the minerals.
Why we like it: Collect royalties, can make money from unusable land
14. Precious Metals
One commodity that’s recently catching a lot of attention is precious metals. Specifically, many investors are looking for ways to invest in gold, as it’s been a currency for thousands of years.
Gold has industrial uses as well, including electronics and jewelry. But precious metal bullions such as coins and bars are going to be your most stable investment options. Bullion can also be easier to sell as its pure gold than consumer items, as it’s easier to assign a fair value.
Silver, platinum and palladium investments are also popular, but their commodity prices can be more volatile than gold. These metals have many industrial uses in addition to currency. A slump in industry demand can cause these prices to plummet.
Owning tiny positions in several precious metals can diversify your portfolio. As always, perform your due diligence to determine if precious metals can help you build wealth.
There are several low-cost ways you can buy gold investments.
You can buy physical gold bars and coins, just like buying rental property. Some investors prefer owning assets they can see and keep in their own homes.
The easiest way to buy gold can be using Vaulted. You can purchase fractional shares of gold bars as you only need to invest at least $10. Vaulted stores your gold at the Royal Canadian Mint. The company can mail you gold bars via FedEx as well.
There is a one-time 1.8% fee for all buy and sell transactions. Vaulted also charges a 0.4% annual maintenance fee.
A second way to buy physical gold bullion is by going to a reputable coin dealer. As gold costs approximately $2,000 per ounce, you may not be able to buy an entire bar at once. Coins can also cost more than gold’s current commodity price due to their collectible value.
Buying precious metal ETFs with your stock broker is another effortless way to own gold. You can avoid the transaction fees that physical gold vendors charge, but you still pay annual fund fees.
Also, most gold ETFs do not let you own the physical gold like Vaulted offers. Nor do commodity ETFs earn dividends. You can make money from precious metal ETFs when their share prices increase as the commodity price rises and you sell for a profit.
Gold Royalty Companies
Streaming companies are one way to earn recurring income by investing in gold. These companies invest in mining projects and earn royalties from the gold miners. You receive recurring dividends as a shareholder.
Investing in gold royalty companies can be less risky than investing in one mining stock. If that mining project fails, the miner’s share price can tumble and take years to recover. Royalty companies invest in multiple projects across many mining companies to manage risk.
You can buy shares of streaming companies from most investing apps, including M1 Finance.
Why we like it: Alternative to paper currency-based assets, cheaper to buy than real estate
Masterworks makes it easy to buy collectible artwork from a variety of classic and current artists. You purchase shares of paintings held in a secure vault for several years. The piece will hopefully appreciate so Masterworks can sell it for a profit.
Both accredited and non-accredited investors can invest in art through Masterworks.
Investing in art doesn’t earn dividends but can be an effective stock market alternative. “Blue-chip art” prices from renowned artists can increase in value even as other asset prices decline.
That’s why owning many different types of income-producing assets can help you make money in any economic cycle.
Why we like it: Own partial shares of fine art, invest in multiple art genres
16. Fine Wine
Another unique way to invest $1,000 or more is by owning fine wine. You might consider owning wine if you can hold your bottles for several years or decades. This asset doesn’t earn dividend income and relies on price appreciation.
Wine values can increase in two ways:
- Fine wine takes time. The taste continues to improve as fine wine ages.
- Scarcity factor. Fewer remaining bottles and steady demand boosts market value.
Vinovest lets you buy bottles of investment wine that store in climate-controlled cellars across the world. You can sell your bottle at any time, but waiting a few years can potentially increase your potential return.
Why we like it: Long-term income potential, rising scarcity can increase the investment value
17. Peer-to-Peer Lending
Another way to earn steady passive income is by lending money directly to individuals. You assume more risk but can earn more interest as you avoid the bank. Most peer-to-peer loans have a three-year or five-year repayment term.
LendingClub is one of the largest peer lending platforms. You can start lending with a $1,000 minimum deposit and buy $25 notes from multiple borrowers.
Borrowers make a monthly payment, and you keep the accrued interest minus a 1% LendingClub service fee.
Like other lending platforms, LendingClub assigns a risk rating of A, B or C to each borrower. A-rated borrowers are less likely to default and pay a lower interest rate.
Historical returns are approximately 5% when investing in multiple risk ratings, according to LendingClub. You can use their auto-invest tool to invest in various note classes quickly. However, you may decide to manually invest to avoid loan requests that are too risky for you.
Your interest income is taxable like earned income instead of like stock market capital gains. LendingClub offers tax-advantaged traditional and Roth IRAs to minimize your tax bill.
Why we like it: Notes cost $25 each, earn monthly interest income
18. Tax Lien Investing
Another unique way to lend money to people and collect interest is by investing in tax liens. Many cities and counties auction off tax lien certificates of properties with delinquent property taxes.
Most tax lien auctions are “reverse auctions” that take place at the courthouse or online. The investor charging the lowest interest rate wins this auction type. The interest you charge is your winning bid, so make sure you don’t bid too low.
As the winning investor, you cover the property tax bill and own the tax lien. The government gets their tax money, and now it’s up to you to collect the lien amount and interest from the property owner.
Local laws designate how long the owner has to pay off the tax lien. You may have to foreclose on the property to recoup your investment costs. Some states may require you to buy the entire property. Research your local laws before bidding on tax liens.
You may consider these real estate investing ideas that can require less effort.
Owning intellectual property rights to music, movies and trademarks lets you earn royalty income. You collect a small payment each time someone buys or streams a product you own the usage rights for.
Royalty Exchange is one of the best marketplaces to find open listings. You will likely need to bid in an open auction for rights. Research the potential income to avoid overpaying.
Why we like it: Collect recurring royalties, own usage rights to digital media and trademarks
20. Start a Business
Investing in yourself and monetizing a hobby can be one of the best income-producing assets. Being a business owner has its struggles, but you have full control of the company decisions.
Your potential profit can be higher as you don’t have to split it with countless shareholders.
Some business ideas include:
- Car washes
- Cleaning service
- Lawn care
- Selling digital ebooks and downloadable items
- Start a restaurant, coffee shop or catering business
- Buy a franchise
- Self-storage facilities
Analyze your local market and see how your skills can meet a need. Starting an online business can also be smart and can have fewer startup costs.
Why we like it: Can make money locally or online, you can use your skills
21. Invest in Private Startups
Not everyone has the time or skill to start their own business. However, you may have the money and vision to invest in rising startups.
Several platforms, including NextSeed, let you fund startups. You might invest in small businesses developing a new mobile app, a boutique hotel or a local restaurant.
Startup investing can be very risky, especially with the current global conditions. You might decide to only invest $100 into each company.
A majority of businesses close before turning a profit. But, if you find “the next big idea,” you can make a nice return, and you have the honor of being one of the first investors.
Why we like it: Share future revenues, less effort than starting your own business.
There are numerous income-producing assets that you can own, as you see. You might try adding one new asset class at a time as your budget allows.
Each one diversifies your portfolio and helps you earn investment income for years to come.
Have you tried any of these? Or which one would you consider? Let us know in the comments below.