Table of Contents
Short on time? Here’s what to expect from the article:
- Passive income creates financial stability, income diversification and more time freedom.
- It could be earned from REITs, blue-chip stocks, P2P lending, property and affiliate marketing.
- The right choice depends on your goals, risk appetite, and whether you’re investing short-term or long-term.
What is passive income?
Passive income is an indirect way of earning from resources without much sustained effort or time, it is typically a supplement to your primary income. Individuals can generate passive income from rental property, intellectual property, or dividend-paying products.
Benefits of passive income
Passive income gives you extra money to use for your retirement plans or to invest in other products to compound earnings. Explore the benefits of passive income below.
- Income diversification: Passive income-oriented investments may further diversify your portfolio of active income funds, reduce the risks and provide a stable fund.
- Financial stability: It may provide a stable cash flow and reduce financial stress. In the long run, it may help accumulate wealth and open new investment avenues to meet long-term financial goals.
- Time freedom: Building an adequate passive income over time may enable more time to focus on other things, like family, hobbies, or other business ideas.
Passive income ideas
There are several passive income avenues that Malaysians can explore to help boost their overall income in order to meet financial goals such as saving for retirement or for a child’s education. Here are some passive income ideas to consider:
Rental property
For Malaysians with multiple property assets, renting out an existing property can help create a stable cash flow. You need an initial capital investment and some occasional property management.
Real estate investment trusts (REITs)
REITs are a popular passive income choice for Malaysians. They offer an easy entry point for investors in the real estate market without a need to own a property itself. With little investment, an individual can earn dividends from the investment in commercial properties.
High-yield savings account
A high-yield account can be a low-risk way to generate some extra funds. These accounts offer excellent liquidity, though the earning potential may be lower than other investment options. High-yield savings accounts come in various formats, such as traditional high-yield savings accounts, online savings accounts, and money market accounts.
Blue-chip stocks
Blue chip stocks are stocks issued by large and reputable companies with stable dividend payouts and a long history of financial performance. They can be high-priced but may provide a steady cash flow with regular dividend payouts. provide a steady cash flow with regular dividend payouts.
Dividend-paying ETFs
These exchange-traded funds share a percentage of their earnings with shareholders in the form of dividends. They hold a diversified portfolio consisting of dividend-paying stocks to offer stable returns to investors.
Income funds
Income funds are a type of unit trust that gives regular income through investments in bonds, dividend-paying stocks and other income-producing securities. It aims to provide consistent payouts rather than aggressive capital appreciation. This makes it a useful investment option for those seeking regular income as part of their retirement goals.
Fixed deposits
If your goal is to plan for retirement and not use instant cash, fixed deposits can be an excellent option for accumulating wealth gradually over an extended period. It’s important to find a reliable and reputable bank for your fixed deposit to ensure the safety of your funds until maturity.
How to choose the right passive income source
Choosing passive income strategies depends on your investment horizon, risk tolerance and financial goals. The following steps can help you choose:
- Assess your financial goals: Decide what you want to achieve with your passive income. You could use it to pay off debts, plan for retirement, or build wealth.
- Understand your risk tolerance: Not everyone has an appetite for high risks. Choose the respective passive income strategy that aligns with your risk tolerance. For example, someone looking for a steady cash flow with minimum risk may want to avoid relying on stocks.
- Consider your investment horizon: Some passive income approaches take longer to show results compared to others. Investments in real estate or fixed deposits can be realised in the long run, while affiliate marketing may offer faster returns under the right circumstances.
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