In this article, we discuss the 7 passive income ideas to make money and build wealth. To read our detailed analysis of passive income and its benefits in today’s world, go directly to the 27 Passive Income Ideas to Make Money & Build Wealth in 2024.
7. Drop Shipping
Dropshipping is a retail fulfillment method where a store doesn’t keep the products it sells in stock. Instead, when a store sells a product using the dropshipping model, it purchases the item from a third party and has it shipped directly to the customer. In simple words, if you set up a dropshipping store, you will act as a middleman between the customer and the supplier. One of the main benefits of drop shipping is that you do not have to go through the hassle of storage or shipping. Reddit users claim that there is a high failure rate in drop shipping, but highly successful ones claim to make six figures annually.
According to Precedence Research, the global drop shipping market is expected to grow from $230 billion in 2022 to $1.92 trillion in 2032, registering a compound annual growth rate of 23.64% during the forecasted period.
6. Invest in Farmland
The agriculture industry has ample growth opportunities, especially when the world is moving towards sustainability at a fast pace. You can invest in farmland and rent it out to farmers for a steady passive income.
In the United States, a cropland’s value and rent in 2023 varies between states. In California, the average per acre value of cropland is $15,880 and pays out an average rent of $486. In Iowa, the average cost of land is $10,100 and pays out $269 on average.
5. Money Market Funds
Money market funds are a type of mutual fund that invests in short-term, low-risk securities like treasury bills, certificates of deposit, commercial paper, and other highly liquid, low-risk assets. These funds are designed to provide investors a relatively safe place to park their cash while earning a passive income.
As of March 2024, some institutions, such as Quontic Bank and Vio Bank, are offering annual percentage yields of 5% and 5.3%, respectively.
4. Long-term Investments in Stocks
Investing in quality stocks is one of the best ways to generate wealth. Dollar cost averaging (DCA) is an example of investment strategies that will allow you to invest safely. The term was coined by value investing legend Benjamin Graham. DCA requires investing a fixed dollar amount regularly. In other terms, dollar cost averaging is like taking small, regular steps into the investment world instead of jumping in all at once. It helps reduce the risk of investing a large sum at a bad time, and it’s a way to steadily grow your investment over time.
To better understand DCA, imagine you have $1,000 to invest in the stock market. Instead of investing it all at once, you decide to spread out your investments over 10 months. For instance, you might invest $100 each month. Now, the price of stocks can go up and down. When prices are high, your $100 buys fewer shares. When prices are low, your $100 buys more shares. Over time, this strategy helps you smooth out the effects of market volatility.
3. Bonds
Bonds are considered a reliable source of passive income. When you buy a bond, you are loaning money to an issuing entity, like a government or corporation. In return, you would receive regular interest payments over the bond’s duration.
US treasury bonds have a varied rate of return depending on the type. At the time of writing, they are averaging between 4% and 5%.
2. Invest in Business Ventures
Look for opportunities to invest in promising startups or established businesses that offer passive income potential. You can invest in these businesses as a silent partner. A silent partner is someone who invests capital into a business but plays no active role in its day-to-day operations or management.
1. Invest in Dividend Stocks/ETFs
Dividend stocks are shares of publicly traded companies that pay a part of their earnings to shareholders in the form of dividends. The dividends are typically distributed on a regular basis, such as quarterly or annually. Dividends represent a portion of the company’s profits. Dividend stocks are one of the best passive income ideas to make money and build wealth, as they yield a steady income stream and carry the potential for long-term capital appreciation. Some of the best dividend stocks include Walmart Inc. (NYSE:WMT), Johnson & Johnson (NYSE:JNJ), and AbbVie Inc. (NYSE:ABBV).
For people with little knowledge of the stock market, well-known dividend ETFs are safe places to invest money. Some of them include Fidelity High Dividend ETF (FDVV) and Vanguard Dividend Appreciation ETF (VIG).
You can also look at the 13 Best Major Stocks to Buy Right Now and the 16 Best Russell 2000 Stocks To Buy According To Hedge Funds.
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