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4 Types of Passive Income You Need to Check Out Today

02 Sep 2022

4 Types of Passive Income | VI College

Some people have good luck, but most people have to work very hard to earn their money. You probably work at least 40 hours a week, if not more. And even though your job could be fun and rewarding, you're probably not making much money because it's so competitive out there.

We've all been there. The good news though, is that it's possible to improve this.

Even though you spend most of your waking hours working on your active income, there are still plenty of ways you can make different types of passive income concurrently.

We know this sounds too good to be true, but before you start calling scam, read on below.

Before we go on though, what is passive income exactly?

Passive income is any income you make without actively working and it all happens in the background while you are busy with your daily life.

In other words, you are making money even while you sleep. In fact, one of the main reasons why it is so popular is because you don't have to do much to have it.

However, there is one thing that you need to keep in mind. It can be simple yet not easy, especially if you don't have the right resources or if you're flooded with an overflow of information. You will also need to deal with the "noise" around you when it comes to investment.

Let's dive into the different ways you can make this happen:

1. Fixed Deposit

4 Types of Passive Income - Fixed Deposit | VI College

Of all the different types of passive income, this is the one we'd least recommend and we'll share why in a second.

In the past few decades, this is one of the most popular options for those who are looking to grow their money in the bank. It is easy, it's very low risk and there's pretty much nothing you have to do except deposit your money in the bank as much as you can.

If you want something that's "out of sight, out of mind" yet don't want your money to just sit in the bank, this is one of the ways to go.

There are many fixed deposit schemes out there and you can choose the one that suits your needs the best. The longer you wait, the more time you have to earn interest on the money.

That said, the return rates for this are usually low and not enough for you to catch up with inflation.

2. Dividends

4 Types of Passive Income - Dividends | VI College

This is a great option for those who want to invest in stocks, and it is one of the most popular ways to make passive income in the market.

If you're not familiar with it, this is basically you buying good stocks and waiting for them to issue dividends (profit share) to all shareholders i.e., you. YES! These things do exist!

This usually happens after they have good financial performance for the quarter or the year. And because dividend companies do not usually have aggressive growth plans, they do not have much use of the profit that came in except to share it with their shareholders.

If you're in Singapore, this gets even better! Apart from stocks, there's also an asset class called REITs which issue dividends to their unitholders (shareholders) almost every quarter, which also means that you will be able to get free money virtually every quarter.

As a result, you'll be able to make a steady stream of income even when you're not actively investing in the market.

3. Capital growth from stocks

4 Types of Passive Income - Stocks | VI College

Similar to dividends, this type of passive income is also a way to invest in stocks and get paid for it.

However, instead of getting paid in dividends, you get paid in the form of capital growth. This is when you invest in stocks and you make money because the value of the stock increases over time.

For example, if you invest in a good company listed on the Singapore Exchange, the price of the stock can increase over time as the company grows and the company share price increases.

The more you invest, the higher the potential return and this is what makes this type of investment so attractive.

Of course, this is also subject to the stock market and there's no guarantee that the stock will increase in value. But if you do your research well and invest with the right knowledge, you can be sure that you'll make money.

See also: Are Cyclical Stocks Profitable?

4. Robo-advisory

4 Types of Passive Income - Robo-Advisory | VI College

This is the new kid on the block and it is the latest way to invest in the market.

Robo-advisory is basically a service that invests in stocks for you. It's a pretty good option if you want to be hands-off and just want to invest in the market. The beauty of this is that it is completely automated, and the service will invest your money as it sees fit.

This means that instead of having to go through the hassle of doing your research and picking the right stocks, you just need to sit back and relax while the service does all the work for you. It's great for those who don't have the time or the inclination to invest in the market. 

The service will do your research and make recommendations on stocks, ETFs, and other assets to invest in as it is not just limited to stocks.

In conclusion, there are many types of passive income in the market and it's a great way to make money without putting in a lot of time or effort. As long as you do your research well, you should be able to get a good passive income without having to worry too much about the ups and downs of the market.

The easiest way is to start by learning about stocks and other assets, and from there, it'll be much easier to decide which one is suitable for you.

We have a gift for you to learn about investing in the right stocks. Click here to redeem your gift.


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