Want to know the secret to building wealth? The answer is pretty simple. Invest in assets that generate income. Yup, the whole idea is to put your money to work for you, so it can earn you more money. This is really important because there is only so much time you can exchange for income as your time is limited.
So it makes total sense to invest in assets that produce income without you constantly having to actively work for it. But first, let's talk about what income-producing assets are!
What is an income-producing asset?
Simply put, an income-producing asset is an asset you pay money today for with the expectation that it will generate income for you in the future. They are essentially investable assets. That being said, it's important to go about it with a strategy in place.
The key to seeing big returns on income-producing assets is to diversify. You've no doubt heard the saying "don't put all your eggs in one basket right?" Well, it's true.
It's no secret that one of the core principles of investing is diversification. Diversification works because it protects your income. If one investment fails, a few others may perform well.
Given the fact that economies can be unpredictable, it is now more important than ever to have multiple income streams. Income-producing assets are a great way to do this.
10 income-producing assets to buy
Curious to know which assets to consider? Check out some ideas below!
1. Online Business
One of the most popular and profitable ways to invest is to start your own business online. Many forms of online business require a lot of work upfront. However, the income potential is unlimited. Online businesses include blogs, e-commerce stores on places such as Shopify or Big Commerce, or even selling on eBay and Amazon.
An online business takes significant time and effort to build. It can take up to two years before you see real progress. However, with a successful foundation, you can make a really good income.
Over time, you can invest less and less time managing the business while still earning income. Eventually, you can potentially sell your online asset or keep it as a side income.
Stocks are an amazing income-producing asset. They can be a steady source of income that can help you reach your retirement goals. In particular, dividend stocks can provide a predictable income source.
They require virtually no work and can help you establish a good revenue stream. Many large established companies typically issue dividend stocks.
These dividend-paying companies are across many industries including health care, financial services, utilities, oil and gas, and basic materials companies.
3. Rental units
Interested in a high-risk high reward source of income? Look no further than rental units. These can include single-family homes, multi-family units, or even apartment complexes. In good times, this can be a constant flow of cash. However, you'll need to be careful during bad economies or times of increased job losses.
Owning rental property is no walk in the park. As a homeowner, you are responsible for mortgage payments, repairs, maintenance, and leasing. You can be prepared for the costs by building a saving buffer however sometimes you may get caught off-guard (especially by phantom costs).
Phantom costs are typically repairs and maintenance bills. Many homeowners often don't factor these in and are blindsided later with big bills, so it's important to keep costs like this in mind. While owning a home can feel daunting, with enough planning and preparation it can be a very financially rewarding experience.
4. Recession-proof brick and mortar businesses
Business, similar to life, usually works in seasons. Many businesses have peak seasons and slow seasons where they focus much of their time preparing for the next uptick in business. However, not all businesses are like this.
Some businesses are recession-proof. Despite what is happening in the economy, these businesses will have consistent if not increasing demand. These businesses include those in the healthcare space such as nursing homes or agencies, laundromats, auto repair, and grocery stores. Regardless of the economy, people always need access to health and food.
Basically, these businesses are essential. Investing in an essential service business can prove to be a consistent source of income during any economic period.
5. Certificates of Deposit
It's always a good idea to invest in a mix of high and low-risk assets. One great low-risk asset to consider investing in is a certificate of deposit. Banks offer certificates of deposit as a way for investors to earn easy, low-risk money.
The mechanics of a certificate of deposit are very simple. Basically, you lend the bank money for a certain window of time. The bank pays you interest. At the end of the day, you earn back your principal as well.
Interest rates on certificates of deposit do tend to be lower than average market returns. However, for the investor looking for a low-risk investment, certificates of deposit are a great place to start.
6. Real Estate Investment Trusts (REITs)
If you're keen on investing in real estate but you're reluctant to part with the upfront down payment costs, consider investing in Real Estate Investment Trust aka REITs.
REITs work exactly like mutual funds. They allow you to buy into a cluster of properties managed by one company. The management company uses money put in by investors to buy new real estate.
At regular intervals, investors can expect their payout in the form of dividends. Investing in REITs allows you to diversify your investment lowering your overall risk. You can also invest in commercial real estate or residential real estate.
7. Peer to Peer Lending
A relatively new income-producing asset is peer-to-peer lending. With peer-to-peer lending, you and other lenders serve as a bank to someone looking to borrow money. Similar to a bank loan, the borrower pays back the principal with interest.
You might be wondering why someone wouldn't just borrow directly from a bank? There are various reasons for this. However, in many cases, the borrower might have a low credit score. Borrowing from banks might therefore be very expensive.
It is important to note that because of this, peer-to-peer lending can be very risky. If you have an appetite for high risk, this could be a great option, however, if you're looking for more security, you might want to explore other alternatives first. Popular peer-to-peer lending sites include Sofi and Lending Club.
Bonds are an incredible income-generating asset. A bond is simply an IOU. It allows you to lend money to companies, state and federal governments, or municipalities.
Bonds are very similar to CDs. They give investors much-needed stability in the face of uncertainty. Additionally, the return on a bond is guaranteed making it predictable income for investors.
9. Savings accounts
One of the first assets anyone regardless of age should get is a savings account. Despite low interest rates offered on a savings account, you can still earn a decent income from this asset.
Additionally, a savings account will protect you from stock market fluctuations and other higher-risk investments such as real estate investing. Savings account interest rates can be as low as 1%. If you're looking for higher interest rates, look into online savings account options.
10. Self-storage units
Of late, there's been a huge growth in self-storage units nationwide. There are up to 60,000 facilities and counting nationwide. Self-storage is an attractive investment vehicle for real estate investors. It involves very little construction costs and low upkeep expenses.
In fact, many self-storage units require little to no staff. People renting units can access their units using a special pin or key to enter the facility.
Self-storage units do not involve much emotional attachment and lease periods are month to month. This allows investors to enjoy any rent increases made with each new lease.
Get started with your own income-producing assets today!
As you can see, there are a ton of opportunities to grow your income through diverse assets. If you'd like to learn more, check out our completely free courses that can help you get started or advance your investment goals.
Our courses include how to create a future for yourself investing, how to invest in the stock market, and how to invest for retirement. There's no better time to start earning more than today!
Also, tune in to the Clever Girls Know podcast and YouTube channel for more investing tips and ideas!