The dream of most people who work full time is to… Quit the job and live off your earned assets. Passive Income sounds like part of a great idea for the future – what exactly is this earning style and is it easy to come by? We list several ways to generate passive income.

What is passive income?

In books or on the Internet , we can find many definitions of passive income.

However, this is almost an income that you get without constantly using your own business. This is very different from what it is in the case of a full-time 8-hour day job, which requires us to be willing to work on a daily basis.

Passive income is based on getting the job done once to benefit later. Let’s take an example. The musician who plays in the restaurant every day is actively working. If he didn’t play one day, he wasn’t paid for it.

The same musician can also make an album that sells in multiple copies. Thus, a one-time business can bring him passive income, even many years after he ventured into a recording studio.

Controversies over the definition of passive income often relate to the issue of time spent on it. According to some, the idea behind passive income is that we don’t have to work at all to make it. As in the case of investments, dividend stocks    or earnings from royalties. Others believe that passive income is a broader term and also, for example, dealing with short-term rentals or active blogging can be included in this form of earning.

However, let’s leave these discussions behind and focus on providing a dozen or so ideas for passive income

People who benefit from passive income are called earners. Most often, this term applies to property owners, which indicates that renting an apartment is the most popular form of building passive income.

The basic solution: deposit

The easiest and most obvious way to generate passive income is to put your money into a deposit or savings account. For depositing money into the deposit, the bank pays us a certain interest. If it is 2% and we put 10,000 PLN on the deposit, then after a year we will get 200 PLN, minus the Belka tax, which is 19%. So we will get a clean PLN 162.

In times of low interest rates (i.e. in 2020 and 2021), deposits don’t make much sense. Their interest rate is only a few percent, which is much lower than the inflation rate of 7%.

It is likely that the passive income on the deposit will be even more impressive in 2022 and the following years, because it is very likely that there will be an increase in interest rates . However, we can no longer count on deposits with a return rate of more than ten percent, as was the case before 2000.

Passive income from real estate

It only takes a moment to put your money into a deposit. It’s very different from the second popular way to generate passive income. It is required to purchase real estate for the purpose of renting it:

• Review offers and understand the market situation,
• visit the property (preferably with a specialist),
• arranging procedures with the notary public,
• renovation or furnishing of the apartment,
• Finding tenants and preparing the contract,
• Taking care of the apartment, minor repairs, collecting rent, paying fees,
• Getting a mortgage if we don’t have enough money to buy the property. Without a personal contribution and satisfactory creditworthiness, it will be impossible to obtain a ” mortgage “.

You see, life in rental apartments doesn’t have to be just roses. Of course, when we inherit Four Corners from our grandparents, and our tenants won’t cause trouble for years, then we can wring our hands with relief.

However, when we have waited for months for the bank to respond, and now interest rates are going up (and with them our commitment premiums), the property is in worse shape than we originally thought, and the tenants are in dispute too.. Then we regret not having decided on a regular deposit or investment in the capital markets the money.

investment funds

As far as the capital markets are concerned, they provide ample opportunities for earning passive income. If we do not want to open a brokerage account and do not have much experience, then our first stop should be investing in mutual funds.

To decide on this type of capital investment, we have to open an account in a fund, deposit money and choose the appropriate investment model. The Fund may invest risky or more conservatively on our behalf. The choice of the sub-fund will affect the rate of return achieved, and it may be several percent or even dozens or so.

It is worth remembering that investing in funds may result in losses, but when our investment perspective is planned for many years, the risks of losses are lower.

stock market opportunities

When we do not want the help of funds in investing money in the stock market, we can do it ourselves. In the context of passive income that interests us, we must reject active gambling on the stock exchange . Daytraders (people who make dozens of transactions per day) often work full time. It is a very stressful activity that requires constant expansion of knowledge, analysis and listening to all the market news.

Medium and long term investments may be a form of passive income. However, buying assets in order to one day sell them at a higher price can be troublesome and requires knowledge and commitment. So what are the stock exchange solutions that will help us generate real passive income?

Three options come to mind:

• Investing in bonds.
• Buying dividend stocks for many years.
• Passive investing using ETFs.

bonds

Let’s start with bonds, which are a form of lending money to the state or private companies. We will receive an appropriate rate of return for this loan. Unfortunately, in many cases, its amount will not be more impressive than the interest earned on bank deposits.

Bonds may be short term or long term. From 3 months to 10 years. Our passive income is paid in the form of interest at regular intervals, for example annually . It is worth remembering that the interest rate on bonds changes according to market turmoil. In addition, corporate bonds carry a huge risk – when a particular company collapses, the money borrowed from it will not return to us.

Dividend investing

We do not always need a brokerage account to buy bonds, for example, fixed treasury bonds can be purchased at PKO BP branches. You will need an investment account to buy shares in dividend paying companies.

This mode of earning passive income involves the purchase of securities, thanks to which we will receive dividends every year, that is, the distribution of the company’s profits to the owners of its shares . If one share of a company that pays dividends regularly costs PLN 100 at a time, and the yield is PLN 10 per share, then naturally our rate of return is 10%.

However, not everything is so simple – stock valuations are constantly changing, as is the amount of dividends. It may also be years when the company decides not to pay dividends. Therefore , companies with a very long history of dividend payments should be chosen to get regular dividend income.

On the Polish market, these companies are, for example, Śnieżka, Neuca, Wawel and Kęty. On America, incl. coca cola.

The big advantage of investing in dividends is usually a higher rate of return than in the case of investing. In addition, creating a brokerage account and buying stocks for years can take as little as 30 minutes. The securities may remain in our account for several years and generate passive income from dividends. Plus, if the share price goes up over the years, we’ll make money selling it.

You can buy dividend stocks without any commission from the brokers mentioned below.

Last updated date: March 7, 2022

The ranking is generated according to the shows that are selected most frequently

		–	factor ? CFDs available on US bonds, costs depend on the selected instrument Bond trading commission	0% ? 0% commission on monthly sales of €100,000. Transactions exceeding this limit will be charged a commission of 0.2% (minimum 10 EUR). Stock trading commission	0 euros or 10 euros ? PLN 0 if at least one transaction has been opened for 365 days or there are no funds in the account, if not opened Account management	424 people chose this offer ” Check “ ⊕ Add to compare ⊖ Remove from comparison
eToro – investment account		Polish zlotys 0 ? PLN 0 (only for clients of eToro Europe Ltd and eToro UK Ltd and does not apply to short or leveraged transactions in shares) Commission on index contracts	–	Polish zlotys 0 ? PLN 0 (only for clients of eToro Europe Ltd and eToro UK Ltd and does not apply to short or leveraged transactions in shares) Stock trading commission	Polish zlotys 0 ? It’s free to join eToro – every registered user gets a free $100,000 demo account. However, like all online platforms, eToro charges different spreads and fees for certain trades and payouts. Account management	178 people chose this offer ” Check “ ⊕ Add to compare ⊖ Remove from comparison	67% of accounts that invest in CFDs lose money
		Polish zlotys 0 ? When you trade indices, TMS Brokers does not charge any fees for holding the indices overnight (there are no financing costs, like SWAP). This is very good news for medium and long term investors. The only cost is the spread, which is the difference between the buy and sell price. Check spreads of stock indices in TMS view. Commission on index contracts	–	0% or 0.19% ? PLN 0 commission on foreign exchanges 0.19% or minimum. PLN 5 commission on WSE Stock trading commission	Polish zlotys 0 ? Only invoice fees may arise if there is no activity on the account for 12 consecutive months. Then the account maintenance fee will be 9 PLN per month. Account management	76 people chose this offer ” Check “ ⊕ Add to compare ⊖ Remove from comparison

The financial instruments offered, especially those with leverage, carry a risk of exposure to losses in excess of the invested capital.

If you want to broaden your knowledge of investing for profits, please read the article:

What is the dividend? How do you calculate return on investment?

ETF-y

Another method of investing in the stock market that allows you to earn passive income is investing in ETFs. These are publicly traded funds that give us the opportunity to grow alongside the entire market. So we don’t have to consider picking individual companies, but we buy the entire index.

It is a safe solution that can bring you ten percent or so of profits annually. The broad market is usually “wiser” than the individual investor’s personal opinions. The only problem with investing in ETFs is that in order to get our income we have to sell our assets. Therefore, it is not the classical placement of capital to keep it running at regular interest.

However, it is worth remembering that there are also distributed ETFs, thanks to which we do not have to constantly buy and sell stocks. How do you buy ETFs? For example, in the Polish broker XTB, which does not take a commission for this pleasure.

Affiliate and affiliate programs

It’s time to get out of the stock market and think of other ways to generate passive income. Unfortunately, these are often ideas that require regular oversight and work.

The way to make money even while you sleep is to create a website and put affiliate offers from different partners on it . To get it, you need to create an account on one of the affiliate platforms.

What products can we promote on our website? The possibilities are endless, it can be home appliances, games, tourism or financial offers. When a user buys a product or opens an account somewhere on our recommendation, we will receive the appropriate reward from the affiliate network.

Unfortunately, not everything is as simple as it seems at first glance. There is tremendous competition in the affiliate business, and building a frequently visited website can require a significant investment of time and money. Besides, the site is not once published, it needs to be updated and moderated.

Ad monetization

A frequently visited website can also generate passive income by displaying advertisements. However, in this case, we need a portal/blog that is popular with users to earn.

Another form of making money from ads is to put stickers on your car or property . Larger cars (more ad space), which drivers use at least several thousand kilometers per month, are particularly attractive to advertisers. We can then count on a passive income of about PLN 500 per month.

Self-service machines

Another way is all vending machines and self-service machines that operate without our intervention and obligation. Our work is limited only to making an appointment with the owner of the building, placing and maintaining the equipment from time to time.

For example, machines serving hot and cold drinks cost from several to several thousand zlotys, and space rental is about 500 zlotys (it all depends on the location). According to experts, one machine can bring an income of several thousand zlotys per month. So after a year we are able to do our own thing.

Getting into this business may require getting the right amount of money. This will be the case when we decide not on coffee machines or slot machines, but on a self-service car wash. Such an investment can cost up to half a million zlotys.

Alternative methods of passive income

Finally, let’s take a look at the remaining ideas, thanks to which we can tend to generate passive income.

1. Equipment Rental – You can rent everything. From bicycles, boats, cameras, and even trucks. However, such a business can take up a lot of our time, and it will no longer be a classic passive income.
2. Selling photos to photo databases – a photo taken every time can be bought repeatedly (even for a few cents) on the so-called stocks, that is, photo bases.
3. Create an e-book, course – the competition in this segment is great, but if we specialize in some field, perhaps someone will be tempted to buy our knowledge and experience, transmitted in text or audiovisual form. With a convenient scale, you can even earn an e-book, which costs, for example, only 3.99 PLN.
4. Create an app/game – micropayments can bring us real wealth. However, this is a suggestion for tech-savvy people.

What are your ideas for passive income?

sources:

https://www.nerdwallet.com/article/small-business/how-to-start-a-vending-machine-business