Passive income is money earned with little or no effort. The concept itself is one of the most sought-after in the investment arena, given that it refers to an ongoing income stream. Truth be told, there is a significant amount of research that needs to be conducted beforehand. Time, effort, and expense is required to select the right investment, but after the investment has been made a passive income stream can be generated. If an investor is not materially participating in generating the income, it is for all intents and purposes considered a passive income stream. There are many such examples of passive income streams such as rental properties, robo advisors, stocks and bonds.
These types of investments can be lucrative, provided the necessary market research is conducted. For assets like rental properties, significant time and effort need to be invested in selecting a property. However, once the right real estate investment has been made it can be managed by a third party and the resulting income streams are known as passive income. Provided the owner is not actively involved in maintaining the property, it is a passive income stream. There are several challenges inherent in property management and property rental, notably qualifying for a mortgage. Once this has been approved, the asset can serve as an effective passive income stream.
Robo Advisor Passive Income Streams
Another popular passive income opportunity comes in the form of robo advisors. These types of investment opportunities can generate ongoing revenue in the form of appreciated stocks and bonds, EFTs and dividend payments. One of the most notable robo advisors on the market is Wealthfront. According to the Wealthfront auto-investment review, this company features a leading team of management consultants, spearheaded by an acclaimed economist, Burton Malkiel. He is the chief investment officer of the corporation, and he brings his knowledge to the fore with expert advice on a wide range of investments. The minimum required investment for the Wealthfront robo advisor is $500, and the fees are limited to 0.25% annually.
The minimum withdrawal amount of this passive investment stream is $250. Investments of less than $10,000 are subject to some of the lowest fees, including exchange traded fund fees. Assuming an account balance of $100,000, the full year’s worth of fees would only amount to $237.50. Wealthfront is a tax-efficient investment, with tax-loss harvesting options and a wide range of assets in its portfolio. These include real estate, natural resources, municipal, corporate, and government bonds, and stock options. Thanks to its tax-loss harvesting, it is possible to reduce annual taxation requirements significantly.
Generating Passive Income Streams from Bonds
Bonds are another form of passive income. A bond typically makes semiannual interest payments to the bondholder. As soon as the bond matures, the issuer of the bond – typically the government – will repay the principal amount of the investment. Over the course of the bond’s investment term, interest is accrued and earned. There are government bonds and corporate bonds – the stability of these depends on the credibility of the bond issuer in question. However, once you have purchased a bond, it is unlikely that the issuer will default on the semiannual interest payments.
This makes it one of the best passive income streams for investors. Bonds are not the only investments in corporate entities that can be made, there are also limited partnership investment opportunities that are available. By taking personal capital and investing it in a company with the option to turn a profit, that in itself qualifies as a passive income stream. If the investor is not actively involved in managing the company, it’s going to be treated as passive income by the IRS.