Are you looking for the best guide on how to invest 100K for passive income, but the information is too cumbersome to sift through? Are you searching for investment vehicles that guarantee the protection of your capital while providing you with a steady flow of passive income? This definitive guide has all the information you need including potential returns and risks on each investment scheme, so read carefully.
In these turbulent economic times, investing is becoming riskier by the day. As if losing money is not enough, each passing day sees fake investment gurus advertise fraudulent investment schemes. This has compounded the problem of choosing the right investment strategy, making it more difficult than finding a needle in a haystack. So what would you do if you had 100K to invest for passive income? Fortunately, there are still guaranteed ways that can make you profits while protecting your capital. Welcome to the best ways to invest 100K for income.
Passive income is money you make without active involvement in the process. Most people refer to it as “make money while you sleep” or “let your money work for you”. The idea is that you pump money into an investment scheme and sit back whiles the scheme pays profits (also referred to as dividends) on your investment. The dividends are mostly paid monthly, but there are weekly or bi-weekly dividends as well. The best way to invest 100K for income is to try any of the following investment strategies.
If you require an investment vehicle in the short-term that’ll protect your money and earn you a nominal profit, then the money market fund is for you.
A money market fund is a type of mutual fund that invests in short-term debts that are of high quality. Most money market fund investors are in to protect their capital while earning some dividends as well. After all, it is better to earn small amounts of money on your 100K than leave it in the bank.
Money market fund puts your money in safe investments including certificates of deposits, commercial paper, treasury bonds, repurchase agreements, and short-term debts of government agencies.
These vehicles have an average maturation duration of fewer than 90 days. That means you won’t have to wait long to benefit from your investments. There are restrictions to the number of monthly transactions and the minimum amount you can withdraw. It is a great way of ensuring that 100K is safe and keeps making money for you. A money market fund is one of the best ways to invest 100K for income.
The major risk associated with money market funds is low yield. It is advisable to keep money there for the short term.
Another great way to earn passive income on your 100K is to invest in short-term and long-term government bonds.
A Government bond is an instrument the government uses to raise money to fund its projects. By investing in a government bond, you earn periodic interest on your initial capital. There are two types; short-term and long-term government bonds.
a. Short-term government bond
The short-term government bond is mutual funds that are invested in short-term projects of the government. These bonds can vary from 3 to 5 years, depending on the type of short-term bond.
b. Long-term government bond
Long-term government bonds are mutual funds that are invested in long-term government projects which mature around 10 years. Investing in a long-term bond means loaning your money to the government for a long period.
There are two distinct ways you on how to invest 100K for passive income from government bonds. The first is to wait till the maturation date of the bond and receive interests payments. The other way is to sell your bonds at a higher price than you purchased them.
The good news is that both long-term and short-term bonds are exempt from local and state taxes. However, on the federal level, they are tax-deductible. Government bonds usually yield around 6% per annum and that is one of the best ways of investing 100K for income.
The chances you’ll lose all your money in government bonds are very low. These investments bonds are low risk because they are backed by the government.
Dividend stocks are also great for passive income. A dividend is the amount of money shared between investors out of the profit made on the stock.
Therefore, a dividend-yielding stock, also known as a dividend stock, is a stock that yields profits or dividends which is distribute among the investors.
All you’ve got to do is to buy the stocks and wait for your profits to roll in periodically. Also, you can buy dividend stocks when they are low and sell them when the price shoots up. There is also the option of short-selling and buying back at a lower price.
Low and medium-yielding stocks have a low payout ratio and can’t keep up with inflation, but they do a good job in protecting your capital. High-yielding stocks guarantee high income but come at high risk. However, generally, it is accept that dividend-yielding stocks are among the best ways to invest 100K for income.
Aside from the government, corporate bodies can issue bonds to fund their activities. These bonds can either be long-term or short-term, depending on the company and its goals. Short-term bonds usually last between 1-4 years while long-term corporate bonds can go up to 10 years.
A corporate bond is a type of debt security that is sold to investors by the issuing company. The company uses the money to fund its activities and shares the profits with the investors.
They can be bought through an investment broker. Normally, the interests on the bonds are paid twice a year until the bond matures. When these bonds are matured, the company will repay the face value of the bonds. You can also make money by selling the bonds at a higher price than they were bought and profit from the difference. It is a great way to make passive income on your 100K.
Bonds are typically safe investments. You receive a steady and periodic stream of income while your principal is protecting. According to finance experts, the returns on bonds are usually between 5%-6% per annum for short-term corporate bonds and about 10% per annum for long-term corporate bonds.
Though corporate bonds are generally safe investment vehicles, they come with their associate risks. If the company that issues the bond falls into debt and is unable to pay, the bonds issued may be discount. It even gets worse if the company defaults in paying off the debts.
Finally, buying a house to rent it out is one of the best ways of investing 100K for income. It ensures a steady stream of passive income from tenants. Renting out your property can help you pay off your mortgage and enjoy tax benefits in real estate.
Rental yield is the profit earn from buying and later renting out a particular property. It is a very lucrative investment as an average rental yield is reportedly between 5%-8%. To calculate your rental yield, simply divide the annual rental income by your total investment and multiply by 100.
You can purchase multiple houses and as real estate prices increase, your properties shoot up in value. You can then profit from the difference between the initial cost and the price increase.
Depending on where your property is present and other economic factors, the returns can vary greatly. However, getting a yield of between 5.5% – 8% is considering a good return on investment. If background research is properly done and you purchase a property at a choice location, then rental yield can be one of the best ways you can invest 100K for income.
Like all investment vehicles, the rental yield comes with its own risks. There is the possibility of high rental vacancy rates, where no one occupies your property. Also, you could have irresponsible tenants who may mishandle your property, making you spend lots of money on repairs and maintenance. Lenders could also foreclose your property if you’re unable to pay your mortgage on time due to negative cash flow from your property.
In conclusion, if you have 100K and want to invest it in a viable venture that’ll protect your capital and steady income stream, look no further. These investment strategies are time-tested and proven to help you build wealth and become financially free. Money market funds, government bonds, corporate bonds, dividend-yielding stocks, and rental yields are the best ways of investing your 100K for income. Choosing that investment plan that combines there securities would help you maximize your return and minimize your losses.
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