In our previous article on passive income, we took a look at a few ways in which one can start investing on a shoestring budget. As one’s savings multiply and pay packets rise, so does one’s appetite and ability to park finances across diverse mediums that ads to one’s portfolio of investments. Here are a few ways that you can multiply your finances with the least amount of participation:
This is one of the most basic methods of making your money or rather making other publicly listed companies work for you. What many don’t realise is that this stream allows one to start investing with a modest amount of money (one option is to create an investment plan where a small sum is contributed every month towards a certain stock). Very often – aside from the perceived and founded risk due to stories of markets doing dismally at will – is the deterrent of brokerage fees once you are up-and-running, which average about SGD 25 per trade. These fees have reduced significantly through the competitive online sphere – filled with droves of brokerage firms looking to earn your commission on trades.
One option for those who have lower amounts of capital is to tap a large number of discount brokers that traditionally offer considerably lower fees as well as unbiased advice, leaving you in charge of all investment decisions. There will always be some discount brokers (accepting starting capital as little as $1000) that will take you on board. You’ll have to shop around – and because there is no handholding, do the necessary research. Research. Research. What is on offer is the opportunity for your stocks to appreciate (capital gains) if chosen carefully as well as handsome dividend payouts. Blue Chip stocks are another viable investment for the novice investor, with their stable earning potential.
Bonds are loans taken out by governments, corporations and even public works programs with the promise to pay interest every year. These provide a predictable income stream used by many people for the expected (usually semi-annual) interest income and also to preserve their capital investment. The minimum amount necessary for investment is usually relatively low, an example being Singapore Government Securities Bonds that can be invested in for as little as SGD 1000.
What is on offer here is income that is far more stable and predictable than stocks as bondholders receive a fixed interest rate and get paid before stockholders. It should be noted, however, that bonds can only be sold penalty-free upon maturity. Not unlike fixed deposits.
If (relative) stability is what one is after, one sound option is the purchase bonds in stable corporations or governments that have sound credit ratings. With this stability, of course also comes lower interest rates earned on your investment. An example of the possible returns on bond investing in Singapore Savings Bonds is the average annual 2.5% return in the year ending January 2016 (based on a 10-year maturity).
Another factor is the duration of the term of the bond – long-term bonds will typically offer a higher yield in exchange for the use of your money for a longer period. Once again, a bit of research here will go a long way.
Turning your Passion into an Income Stream
We’ve heard it again and again. And again. We all have things that we are passionate about and they can create side incomes that sometimes (with a bit of luck and timing) take over as our primary income source. A great example of passion turning into profits is the story of Debbi Fields (founder of Mrs Fields) who started selling cookies at the age of 20. Although some preliminary as well as ongoing effort is necessary, we have decided to include this one as once you have your systems in place and automated, the income becomes relatively passive. Channel your passion through avenues like blogging, Instagram or any other social media platform. This works for almost any interest you might have be it in photography, food, makeup, etc.
Leverage influencers to get your exposure or use social media to reach a large base of potential targets. Once you have created sufficient traction, you can explore the likes of affiliate marketing as well as Google AdWords etc. to line your pockets. If and once you become an influencer, the dividends will pay well – local food blogger ladyironchef is known to charge as much as SGD 3800 per article.
Above are a few ways in which you can further advance your passive income streams and move one step closer to financial freedom. As your capital and acumen both rise over time, so will your need to explore other avenues to invest in.