The Closest Thing To Passive Income – Fixed Income Investments

I hate to debunk the myth made popular by internet marketers but there is no such thing as 100% passive income. The truth is that all so-called passive income still requires work. However, the good news is that in some cases it only requires an initial workload and that would be the case with fixed income investments.

In this post, I would like to discuss two great ways to earn near passive income. They are investing in bonds and P2P lending.

Investing In Bonds

Once you have accumulated excess capital then putting some of it into bonds is a great way to earn the closest thing to passive income you will find. A bond is a debt investment, similar to a loan, in which an investor lends an amount to an entity (usually a corporation or government) which borrows the funds for a defined period of time at a variable or fixed interest rate.

The initial work is picking the right bonds with the right yields (% return) and the maturities that match your investment horizon. Depending on the riskiness of the bonds you decide to invest in you can currently earn between 2-8% annual interest income on your investment minus the fees your broker charges you. Once you are invested and you hold your bonds to maturity that income is passive as the interest income will hit your account without you having to lift a finger.

For more details on investing in fixed income securities please check out my online course on the subject.

Peer-to-peer Lending

Similar to investing in bonds you could engage in P2P Lending. P2P Lending refers to lending money to unrelated individuals without going through traditional financial intermediaries such as banks. With peer-to-peer lending, you can earn higher returns than for traditional fixed income investments as the risks involved are higher but the concept is the same. You lend money and receive interest plus the principal back at the end of the investment period.

peer-to-peer lending

Popular P2P platforms are ZopaFunding Circle, and Lending Club to name just a few. With the decrease in banks lending to individuals and small businesses, P2P lending has received a massive boost so there are several platforms to choose from.

Once you have picked your P2P investments you can sit back and wait till the interest payments come in. But be aware that these are riskier than bonds as you are lending to individuals so make sure you do your due diligence about the platform and the borrowers you lend to.

financial intelligenceIf you want to learn more about investing and how you can use innovative new services from the financial technology sector to manage your money and improve your financial situation, download my ebook Everything You Need To Know About Money – The Complete Financial Intelligence Handbook.

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Alex founded SmartMoneySmartLiving.com in 2015 to empower millennials to take control of their financial future and guide them along their journey towards financial freedom.