With early planning, you can create multiple streams of income besides your primary source (your full-time day job), that may require initial capital and work initially but help you bring consistent revenue in the later years, without much effort.
These are passive sources of income that will help you attain financial independence sooner than otherwise traditionally expected.
However, it is important to understand that these sources of income will only be valuable if you are able to give your time/money to it at the initial stages; to successfully launch it. It is also important that you choose an option that you are able to keep track of easily.
1. Sell your skill/interest online
It is not news that money can be made making videos on YouTube or writing blogs. These content creators earn revenue from ads and endorsements, even on older content.
Establishing a YouTube channel or a blog takes a lot of initial dedication and hard work. If you have been able to achieve it, that's great, however, you can think beyond those streams of online revenue, like:
- Sell a course in your area of expertise or interest on sites like Udemy, Skillshare and Coursera. You can even join a local tutorial class if you can spare a few hours every week to teach.
- Write a book and self-publish it on Kindle.
- If you are good at photography, create generic images and sell it to stock photo websites online.
All of the above ideas for passive income are not easy. It requires you to take some time off and put efforts so that your product stands out from the rest. The only way you can make money out content you produce is if it is worth the buyer's money and time.
However, in general, even if you were to write a best selling book, you cannot just write one book and leave it at that.
Apart from marketing the product, you will also need to create more excellent products in order to be able to establish a brand name and keep income flowing.
2. Real Estate
Be it a residential space, a commercial space, a plot or even agricultural land, real estate has the potential to wealth over the long term. Apart from rental income, you can earn from the appreciation in the value of the property.
However, to buy real estate, you will need initial capital. For the last couple of years, real estate prices in India have fallen, giving you an opportunity to invest at reasonable prices.
If you already have property inherited from your ancestors, you can revamp it to let out space for commercial or residential use.
Note that you will have to consider costs like home loan, maintenance costs, taxes, etc. You may want to set the rent after considering these costs to reach a return on investment (RoI) that you wish to achieve.
3. Dividend Stocks
There are companies with dividend-yielding stocks that believe in distributing a part of their profits to investors at least once in a year.
All you have to do is buy the stock and hold it. The dividend, as and when disbursed, will be directly credited to your bank account linked to the trading account.
- You will have to do a good amount of research before you pick stocks that yield dividends.
- Dividends are paid per share, which means that you earn more dividend if you hold more shares in the company.
- Dividend income is taxed in India when it exceeds Rs 5,000 per annum.
4. High interest-earning deposits/schemes
This is probably the easiest of all passive income sources mentioned on this list.
The idea is simple: pick a bank/financial institution or scheme that pays the highest interest rate.
But, you cannot give away a large sum of money without first ascertaining the safety of the deposit.
Your safest bet would be voluntary provident fund, which is nothing but increasing your contribution towards your existing provident fund. PF money, however, will be locked till you retire or quit your job for a long period.
If you are looking for medium-term liquidity, you can look at high interest-earning fixed deposits or government savings schemes. If you wish to have the highest possible liquidity, you can opt for a savings account with a bank that pays interest higher than its peers.
Note that tax at the rate of 10 percent is deducted from interest income if it exceeds Rs 40,000 per annum.
5. Mutual Funds
Equity investments have a proven track record of multiplying cash invested over the long term. Time plays an important role in this development because equity is highly volatile in the short term.
If you do want to risk picking up stocks yourself, dealing with the pressure of picking the right stock at the right time, mutual funds will help. There are many asset management companies whose performance is reviewed on the basis of returns they generate from the mutual funds they manage. These are managed by market experts whose job is to actively work on generating high returns and manage market-related risks.
If you do not know what kind of mutual funds will work for you, you can seek help from a registered investment advisor (RIA).
Mutual funds have become easy tools of investment, thanks to the advancement in technology. You can invest and track your investment over your smartphone. You can start investing with as little as Rs 500 via SIPs (Systematic Investment Plans).
6. Network Marketing
Network marketing is a type of business model dependent on person-to-person sales by independent representatives, often working from home. It requires you to build a network of business partners or salespeople to start making passive income.
There are many reputable network marketing operations. To pick the right one, its important to differentiate between pyramid schemes and network marketing. The former is pitched as a chance to make money by recruiting others while the latter is about making money selling products.
The article is purely informational and is not a solicitation to buy, sell in securities mentioned in the article. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and the author do not accept culpability for losses and/or damages arising based on information in this article.
About the author
Olga Robert is an M.Com graduate covering equity markets and personal finance for nearly three years. Her interests include tax planning, equities, DIY personal finance management and government schemes.