Ever wondered how to increase your wealth?
You may have some answers in mind but investing in assets that produce income is one of the most important ways to build wealth.
You can start to generate multiple streams of revenue with these assets, which will help you compound your nest-egg over time.
Personal finance is something I was interested in long before I became a fan of multiple income streams.
It’s hard to say where this mindset came from, but at the time it seemed like a good way to protect oneself when money was flowing in all directions.
Why shouldn’t people working for these brands have the same opportunity? – Roland Martin
Table of Contents
The Best Income-producing Assets
Secure Income-Producing Assets
Other Income Generating Ideas
Final Thoughts
The Best Income-producing Assets
When I was learning about personal finance, one thing I discovered is that you need to invest in assets with income-producing potential.
This idea is essential for beginners and beyond.
Income producing assets is a term used to describe assets that can help you generate passive income by putting your money to use.
What are the safest assets that can generate income? What assets should beginners buy? You are at the right place.
Below are the best assets that will generate income for you.
In this first section, remember that these assets are more risky. A good portfolio of investments can help you balance your risks and diversify your income.
Personal Capital is a great tool to help you maintain your net-worth, track your investments and keep an eye on your assets. Personal Capital is completely free! Here you can keep track of your assets.
Dividend Stocks
The stock market is the most popular way to generate income. You have several options, including individual stocks, index funds or mutual funds, as well as ETFs.
Stocks are cool because many companies pay a dividend to investors or give them a portion of their profits.
Some major companies also increase their payouts each year!
Dividends are a popular way for stock investors to live passively off their returns. Dividend investing is a much larger topic than I can cover here.
You can choose to invest in dividends by selecting stocks or you can use index funds that include companies with dividends.
Vanguard Dividend Growth Index Fund (VDADX) is one of the index funds I have in my Vanguard rollover IRA.
- Rental Properties
Renting properties and owning real estate has made many millionaires. People continue to accumulate wealth by owning property.
There are risks involved. Real estate can be very rewarding.
Renting out your property allows you to pay off your mortgage each month. You can also build equity by owning rental properties. Later, you can sell the property at a profit depending on the housing market.
Rent out your vacation home, apartment, duplex, house, or even a vacation home using Airbnb.
- Real Estate Crowdfunding
Real estate crowdfunding sites have also grown in popularity.
Crowdfunding removes many of these limitations. Instead of having to pay large sums of money up front and deal with maintaining property ownership, crowdfunding can be a great alternative.
You can choose to invest in real estate based on the goals you have. It could be a collection of properties or a single real estate.
Real estate crowdfunding comes in many forms, but all offer investors the chance to own a piece of real estate.
Some initial investments can be made for as little as $500 or $1,000. Some of the best investments are:
Fundrise
DiversyFund
Ground Floor
- Peer to Peer Lending
Peer to peer lending is a popular way to earn extra money. I’ve never tried it myself. This is also known as “crowdlending”, or P2P.
You lend money to others through one of the very few P2P platforms. The personal loan will be repaid with interest and you’ll make money.
This is great for people who need money quickly, because they do not have to go through the financial paperwork that they would at a bank. The interest rates charged by banks are also much higher.
Investors are at risk of relying on a borrower with poor credit to repay the loan.
Typically, P2P vendors will give you risk information on the loans that they offer. Returns on platforms such as LendingClub and Prosper can range between 4-8 percent.
- Building an Online Business
Building an online business is one of my favorite things to do. It takes a lot of work to create an audience.
Once you have built up an audience, this can become a valuable asset. You can sell it later on.
You can start an online business by creating a WordPress site, purchasing an existing one, setting up an e-commerce shop with Shopify or Amazon FBA. Or you could sell a digital item (like an eBook).
Many online businesses can be relatively passive. At a certain stage, you don’t need to do much maintenance in order to maintain a steady income.
This can take a lot of work and time. The money you earn can be a bonus, and could even change your life.
- Owning a Traditional Business
This section is separate from the previous one, as traditional businesses and online businesses are different. They are still very effective assets that can generate income.
You have many options, but here are a few to mention:
Coffee Shop
Laundromats
Car wash
Bar
Food truck
Some of these businesses require a lot of hard work and effort. Others will take less time to maintain and require low maintenance.
There may also be significant upfront costs, or the need for a retail location.
What you choose here will depend on whether you are looking to earn extra money or work for yourself full-time.
Secure Income Producing Asset
Secure Income-Producing Assets
The above options are fairly common, but they can carry a medium-high risk depending on which one you choose.
You can choose a few options, but there are also other choices.
Here are some safe assets that can produce income. They may be good to start with for beginners. There may be some risk in these assets, but it is lower than the previous section.
- Money Market / Savings Account
This might not seem to fit in with the rest of your assets, but it is technically a source of income.
This is particularly true if you select a savings account or money-market that offers a decent rate of interest.
These accounts will help you to reduce your risk in the stock market, real-estate, and other investments, while still generating income.
It is a challenge that the interest rates on your money are low. Your money is safe and you can easily access it if necessary.
I have my favorite online banks, but you can’t go wrong with any bank that offers an interest rate over 1%. You can choose which bank account or money market best suits your money needs.
- Certificates of Deposit (CDs).
As a child, my older family members used to encourage me to save money and buy CDs.
The money that accumulated over the years was not impressive. However, I received interest on the money that was used to pay for my college expenses.
Banks provide CDs as safe, income-producing assets.
You can use them like savings accounts, but you will not be able to access the money for a certain period of time.
The bank will receive a loan for its own use. However, you’ll earn an interest rate after a certain period.
You might not be able to make as much money with the rising inflation and your CD’s length. Consider this if you’re thinking of buying CDs.
- Bonds
In a sense, investing in bonds is like buying CDs. Instead of lending money to a bank, you lend it to corporations or governments.
You may be investing in bonds on the stock exchange, which is a safer investment to balance your portfolio.
Bonds are usually more stable and offer guaranteed returns than stocks. They are still lower returns than stocks. Remember, safer investments typically have lower returns.
Here are some of the different types of bonds that produce income:
Corporate Bonds
Junk bonds
Treasury Bonds
Municipal bonds
If you want to learn more about bonds, click here.
- REITs
You’ve probably heard of REITs if you are a regular reader of this site. Real estate investment trusts are REITs. They are the mutual funds of real estate.
These funds are run by companies that own multiple properties and are a great alternative to investing in real estate crowdfunding or owning rental property.
Investing in real estate involves the purchase and development of property.
You can avoid the hassles of property ownership by investing in this income-producing asset. You can also diversify your real estate to include corporate buildings, apartment complexes, hospitals and more.
These REITs are required by law to distribute more than 90% of their profits to their shareholders. This can provide you with a nice source of income.
Vanguard’s VGSLX index fund or VNQ ETF can be found in your brokerage account.
Private REITs like stREITwise offer diversification as well as different risks.
Other Income Generating Ideas
There are other ideas for generating income that you might want to consider.
As I am limited in my knowledge and experience, I didn’t go into detail. You should know they are available and that you could consider them as options.
- Farmland
- Timber/Wood
- Royalties
- Storage Rentals
- Annuities
- Private Equity
- Art Investing: Masterworks
- Tax Liens
Final Thoughts
It is ultimately up to you whether or not you are more conservative with your investments and assets.
To build wealth and increase your net worth you need to invest in assets that generate income.
My advice is to start investing and stick with it.
Set your financial goals. Only take on risk that you can handle. Stay the course by checking in and rebalancing periodically.
These are some common options, as well as some safe ones to consider. The above aren’t all of the ideas for generating income, but they should give you a good place to start.
I hope this helps!
What are the most valuable assets?
The following are some of the best assets to generate income:
Dividend-Paying Stocks
Real Estate Crowdfunding
Real Estate Investment Trusts (REITs)
Online Businesses
Rental Properties
Peer to Peer Lending (P2P)
What are good assets, and what is a good asset?
You can invest in assets that produce income, such as stocks, rental property, real estate crowdfunding, or an online business. They can also increase in value over time, besides making you money.
