10 Smart Ways to Generate Passive Income in 2022

Passive income can provide a helpful supplement to your monthly cash flow, and we believe it’s an effective way to build wealth long-term, enabling investors to potentially meet their personal finance goals. Here are 10 smart passive income strategies to consider for diversification in 2022.

Affiliate Marketing: Scalable Work

We believe affiliate marketing is the most work-intensive passive income idea on this list. If you’re willing to put in the work, however, this method might generate substantial revenues without only minimal capital investment.

The task of an affiliate marketer is to sell another business’s product or service. The advertising can be done through a blog, newsletter, podcast, course or other means. How much ongoing work is required depends largely on what means are used. For instance, bloggers must regularly write new content, but an online course might be entirely hands-off once created.

Affiliate marketing could be either a job or a source of passive income. Consider carefully how you’ll phase out the work if you want it to be a fully passive income opportunity.

Who It’s For: We believe if you’re not financially able to purchase investments with cash flow, affiliate marketing offers access to potentially substantial passive income without a large capital outlay.

Royalty-Generating Products: Large Initial Investment

Products that generate royalties can provide long-lasting passive income once they’re created. You’ll have to make a substantial upfront time commitment but resulting royalties from sales could provide indefinite passive income once a product is complete.

Most royalty-generating products are creative ones. Ebooks, physical books and stock photos commonly provide their creators with royalties (if the products are successful).

Who It’s For: We believe If you’re creative and able to produce something that’s in demand, selling royalty-generating products could provide a small amount of regular income that lasts for years.

High-Yield Savings Account: Accessible Cash

A high-yield savings account pays nominal interest on the account’s balance. The interest rate isn’t as high as some other passive income streams listed below, but it’s typically more than what a checking or standard savings account will provide. The rate also fluctuates with current market rates.

To earn money from a high-interest savings account, simply set up an account and deposit funds into it. You can make a one-time deposit, irregular deposits or automated regular deposits.

Who It’s For: We think a high-yield savings account allows you to earn some interest while keeping your funds fully liquid. This is generally a good place to keep a 3- to 6-month emergency fund.

Certificates of Deposit: Possibly Higher Interest Rates

Certificates of Deposit (CDs) guarantee your funds but lock them up for a set period. In exchange, the savings vehicle pays some interest.

The interest you receive from a CD won’t be too high. Your money isn’t at risk, though, and the interest could be higher than what a high-yield savings account from a typical financial institution pays. You should compare CD and savings account offers if you’re considering these two savings options.

Who It’s For:  We believe a CD is a good place to store money that you’ll need to meet short term financial goals. You can choose how long the money is locked up for, and you’re guaranteed to get all of the money back–with a little interest too.

Treasury Bonds: Interest at Lower Tax Rates

Treasury bonds work much like CDs do, except these bonds are issued by the government and typically have longer durations (e.g., years). When you purchase a treasury bond, you effectively loan money to the government for a set period of time. You receive some interest in exchange for the loan.

Treasury bonds provide unique interest income, in that you don’t have to pay state income tax on any interest earned. Savings accounts and CDs typically require paying state income tax on any money earned.

Who It’s For: We think if you’re a high-income earner and located somewhere with high state income tax rates, the tax savings that treasury bonds provide could add up. If you’re a low-income earner and/or somewhere with no state income tax, this benefit will be marginal at best.

Dividend Stocks: Regular Income with Potential Appreciation

Dividend stocks provide regular income with exposure to the stock market. These stocks can gain (or lose) value just like any other stocks, although they’re generally less volatile than growth stocks. They also pay regular distributions to stockholders in the form of dividends.

Dividends may range anywhere from a nominal amount to a significant percentage of a stock’s price. Before purchasing a stock solely for its high dividend yield, make sure the dividend has been consistently paid for many years–unsustainable dividends can be canceled.

Who It’s For: We believe dividend stocks come with some risk, but the risk is comparatively low and allows for possible additional gains. If you want a low-risk investment that pays more than a savings account, bonds, or CDs, we believe this can be a good stock market investment.

Mutual Funds: Regular Income, Appreciation and Broad Exposure

Mutual funds generally hold stocks, which may appreciate (or depreciate) and potentially provide dividends. The role of mutual funds is largely similar to that of dividend stocks, but funds diversify by investing in a broad range of stocks.

Some mutual funds specifically focus on dividend-paying stocks. These funds may provide more regular dividend income than funds that hold only a few dividend-paying stocks.

Who It’s For: We believe if you want exposure to dividend payments and potential growth, mutual funds provide both while diversifying to mitigate the risks of holding any single company’s stock.

Real Estate Investment Trusts: Large-Scale Real Estate

Real estate investment trusts (REITs) are akin to mutual funds for real estate investments. They invest in multiple large-scale real estate development projects and investment properties. REITs may pay disbursements like dividends, and they can also go up (or down) in value.

REITs make it possible to invest in residential, commercial and other real estate investment opportunities that would otherwise be inaccessible to most individual investors.

Who It’s For: We believe if you want exposure to real estate as an alternative to the stock market, REITs offer broad exposure across many types of investment properties.

Rental Properties: Leveraged Real Estate Properties

Rental properties can provide monthly income and appreciation, and we think offer relatively affordable options to get into. You can usually purchase a property with only a portion down–which makes it possible to leverage capital more than stocks, mutual funds and REITs do.

Managing rental properties can be a hands-on task, with late-night calls for clogged toilets and issues finding tenants. If you want a hands-off experience, hire a property management firm to take care of these issues.

Who It’s For: We believe you might purchase a rental property if you want the opportunity to build up regular cash flow quickly while gaining appreciation over years.

Invest in Real Estate with EquityMultiple

If you’re interested in commercial real estate as a passive income investing strategy, consider getting started with EquityMultiple’s online platform. Accredited investors can find access to direct real estate opportunities, private real estate funds, and more.

To learn more about EquityMultiple, please feel free to check out our Track Record, or contact Investor Relations for more information.

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This document is for informational purposes only and is not an offer or solicitation to purchase or sell securities. Investing involves risks, including the potential for principal loss. There is no guarantee that the strategies and services will be successful or outperform other strategies and services. Certain assumptions may have been made in connection with the analysis presented herein, and changes to the assumptions may have a material impact on the analysis or results.

Past performance is no guarantee of future results. The investments discussed herein may be unsuitable for investors depending on their specific investment objectives and financial position. Investors should independently evaluate each investment discussed in the context of their own objectives, risk profile and circumstances.

All opinions expressed herein constitute the author’s judgement as of the date of this article and are subject to change without notice. Statements made are not facts, including statements regarding trends, market conditions and the experience or expertise of author are based on current expectations, estimates, opinions and/or beliefs. Such statements are not facts and involve known and unknown risks, uncertainties and other factors. Past events and trends do not predict or guarantee or indicate future events or results.