One of the best ways to generate income and supplement your salary is through passive income streams. Sure, you could make more money by working longer hours, getting a second job, or trying to advance your career. But, there are only so many hours in a day which severely limits your earning potential. Investing your money in passive income streams allows you to put your money to work for you. And, you don’t need a ton of money to get started. Here are 7 ways you can create passive income streams with a $1000 investment.
7 Passive Income Streams from a $1000 Investment
1. Buy Stocks
Many investors will tell you that buying dividend stocks is the simplest and most profitable passive income stream. You can purchase stocks from well-established companies with a history of good returns. Or, you could try your hand at picking your own stocks. While this comes with greater risk, it could also have greater financial rewards.
Those who are more risk-averse can invest in mutual or index funds. These offer you more market exposure and a percentage of the dividends from multiple companies. Another benefit is that the built-in diversification helps protect your assets during market fluctuations.
However, if the idea of choosing your own stocks has you panicking, you can always hire a robo-advisor. Having an automated investment manager that uses your preferences and input to customize your portfolio takes the guesswork out of the equation. It also takes a hands-off approach and avoids the predatory sales tactics of human financial advisors. And, the low fees and lack of account minimums are great for beginning investors.
2. Invest in REITs
Investing in REITs is another great option for those with a specific interest in real estate. These trusts pool money to buy and manage residential, commercial, and industrial properties, then pass a percentage of the earnings to their shareholders.
You have over 200 publicly-traded REITs to choose from. But, a handful stand out from the competition. The ones that are making the most recent headlines include AvalonBay Communities, Realty Income, W.P. Carey, and SL Green Realty.
There are also new crowdsourcing platforms such as Fundrise, CrowdStreet, and DiversyFund where you can buy a percentage of properties. These are great options for people with little cash since you only need $10 to buy-in. And, most earn an average of 8-12% returns on their investments. If you were to reinvest your dividends, it could turn into one of the most lucrative passive income streams from only a $1000 investment.
3. Purchase Bonds
Now that the stock market isn’t performing as well, there is more focus on purchasing bonds. There are various types to choose from including bonds issued by a company, the state, or the federal government.
When you purchase bonds, you are essentially loaning money with the expectation that they repay the loan plus interest. And, you can choose terms and timelines that best suit your goals. In general, bonds are a low-risk investment that helps offset the equity in your portfolio. Furthermore, since their value is indirectly correlated to the stock market, they perform better when stock prices are down. So if you want to hedge against inflation and market fluctuations, bonds are a safe bet.
4. Open a High-Yield Savings Account
If you aren’t looking for ways to expand your portfolio, there are smaller changes you can make to generate passive income streams. For example, choosing accounts that offer better interest rates will earn you money. Rather than letting your money accrue minimal interest in your checking or savings account, you can transfer it to a high-yield savings account.
It’s easy to set up and transfer funds, especially if you already hold other accounts with the bank. However, you can earn even better rates if you choose an online bank. By opening a high-yield savings account with interest rates of around 0.6%, you earn more money with minimal effort.
5. Rent Out Your Spare Room
Another trend that has gained popularity is renting out personal property for travel accommodations. If you have an extra room in your house or a vacation rental that you don’t use, why not make some extra cash?
With all the different sites out there, there are endless ways to attract potential guests. And when you cross-list the rental space on the most popular sites such as Airbnb, VRBO, Flipkey, and Homestay, you’re more likely to get bookings. By using your money to spruce up the place to make it more appealing, you could create passive income streams with only a $1000 investment.
6. Sell Your Spare Bandwidth
If you don’t want to use your home to generate more income, you could consider selling your bandwidth instead. Many people pay for unlimited data. However, you could sell what you aren’t using to earn money.
Although they function in different ways, you can start generating passive income by installing an app on your phone or PC that runs in the background. People pay to utilize your bandwidth, bringing you more monthly income. Packetstream pays you $0.10 for every GB shared while others such as EarnApp can give you about 30$ a month selling 1GB of bandwidth a day.
Your location, network speed, and the number of IP addresses affect how much you can earn. The more traffic, devices, and IP address you use, the more you earn. However, safety is always a consideration since there are no guarantees of who will be using your bandwidth.
7. Own Royalties
Another alternative asset that is gaining traction among alternative investors is owning royalties. With partial shares and online marketplaces, it’s becoming easier to invest in creative assets. Although you wouldn’t own the copyrights, you could earn a portion of future revenue. When you buy royalties, you earn money every time your intellectual property gets used.
To attract new types of investors, sites such as Royalty Exchange package them into familiar investment vehicles with term-based yields. They perform independently from the stock and bond markets, have a history of strong returns, and have the potential to outperform traditional assets. And now you don’t need to be an industry insider to get in on the ground floor.
Using Time to Your Advantage
Even if you feel you don’t have enough money to start investing, it doesn’t require a fortune to get started. Additionally, the sooner you start investing, the greater advantage you gain. Time and compounding interest are your greatest assets if you’re low on capital. So, you can start making small, steady contributions now that will exponentially increase your initial investment.
There is no “right time” to start investing, so don’t use a low bank balance as an excuse to get started today. Rather than letting your money sit idle, you can use it to help build your retirement savings, protect your family against income loss, and reach your financial goals faster.
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Jenny Smedra is an avid world traveler, ESL teacher, former archaeologist, and freelance writer. Choosing a life abroad had strengthened her commitment to finding ways to bring people together across language and cultural barriers. While most of her time is dedicated to either working with children, she also enjoys good friends, good food, and new adventures.