Many people find themselves in similar financial situations. You need to earn more, or you hate your job, or you want to diversify. Any way you look at it, investing may provide you with that boost. Investing should never be approached as a get-rich-quick scheme, but if you make wise choices, it can provide a modest income increase. Here are a few ways you can successfully use investing to earn a passive income.
First You Have to Start Saving
While you don't have to have a fortune to invest, you will need some savings to get started. You can start by saving just $10 a week until you build up to $500 or $1,000. If you don't think you can save the $10 per week at home without spending it, open up a savings account and store the money there. Online savings accounts are more desirable, because it takes up to two business days to retrieve money from your account, which will not be linked to a debit card. Additionally, online banks offer some of the highest interest rates available to help customers grow their savings.
Invest with a Roboadvisor
At some point, you should take the time to study the world of investing in depth. Companies like Options Animal offer courses and other resources to help you learn how to choose good risks over bad ones. In the meantime, you can start investing wisely by using a roboadvisor. This is an automated app that makes use of AI (artificial intelligence) tech to help you choose investments. These apps, which include Welathfront, M1 Finance, Betterment, and Swell, offer some of the lowest fees and don't require substantial opening deposits. Swell offers the lowest minimum deposit at just $50 to open your account, while Wealthfront is at the other end of the spectrum, requiring a $500 minimum deposit.
Buy High Dividend Stocks
High dividend stocks are worthwhile, because they offer two ways for you to earn income. First, you'll earn annual dividends that can provide a modest source of income, although the amount you earn in dividends will vary based upon the performance of the stock. As the stock appreciates, your initial investment will also multiply, giving you that second source of potential income. Purchasing high dividend stocks requires a brokerage account, but that's easier to obtain than it has been in the past. You can use one of the previously mentioned roboadvisor accounts, or you can open an individual trading account with companies like Scottrade or Etrade.
Don’t Overlook Hidden Gems
Tech startups are really popular, and many people have made good money by investing in them. Gold is also popular. But what about other gems that might be hidden. There are many public companies in a wide variety of growing industries, and perhaps you may have never heard of them. Some companies create capsules for pills while others handle medical devices and enterprise imaging solutions. Talk to people in various industries to find out who the up-and-coming companies are. You might help them grow and make yourself a nice wad of cash in the process.
Invest in REITs
If you're more interested in real estate than in stocks, investing in a REIT (real estate investment trust) may be more appealing to you. This allows you to invest in real estate without having to get involved in the day to day operations of developing or managing real estate. It's essentially a mutual fund for real estate and each REIT deals with a specific type of real estate. For instance, one REIT might invest exclusively in commercial real estate, while another fund might invest solely in industrial properties. Each REIT is overseen by a fund manager who is experienced in evaluating real estate investments.
Choose a Dividend Reinvestment Plan
Different from investing in a single high dividend stock, this is a plan that makes it possible to invest in several high dividend stocks. Dividend Reinvestment Plans, or DRIPS, provide an opportunity to invest your small amount of savings into multiple companies that pay out dividends to stockholders. As dividends are paid out, you can reinvest them to buy more stock in that company. As you increase your shares, your dividends will also increase. This can help you build up your investment over time, so you'll hold a larger share in the company.
As you go, you may find other ways to use investing as a source of passive income. Investing is a waiting game, so don't be easily discouraged. Investing over a longer period of time will help you generate steady cash flow. Depending on how well you research and invest, you can earn a strong annual income from your portfolio.