HOW TO EARN PASSIVELY: PART 2 – INVESTMENT-BASED PASSIVE INCOME

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Olori Uwem

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Mar 18, 2024
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HOW TO EARN PASSIVELY: PART 2 – INVESTMENT-BASED PASSIVE INCOME

Hi Everyone❤️. Welcome back to our series on how to earn passive income! Last week, we introduced the concept of passive income and its benefits. Today, we delve into part two, focusing on investment-based passive income. This type of income is generated from various investment vehicles, which can provide a steady stream of income with minimal effort once the initial investment is made. Let's look at four popular avenues: stock dividends, bonds, real estate, and peer-to-peer lending. Shall We?

STOCK DIVIDENDS
What Are Stock Dividends?
Stock dividends are payments made by a corporation to its shareholders, typically from profits. They are usually distributed quarterly or annually and represent a portion of the company's earnings.

How to Earn from Stock Dividends:
1. Invest in Dividend-Paying Stocks: Look for companies with a history of consistent dividend payments.
2. Reinvest Dividends: Use a dividend reinvestment plan (DRIP) to buy more shares, compounding your earnings over time.
3. Diversify Your Portfolio: Spread your investments across various sectors to mitigate risk.

Example:
If you own 100 shares of a company that pays a N2 annual dividend, you'll earn N200 per year. Reinvesting these dividends can grow your investment faster through compounding.

BONDS
What Are Bonds?
Bonds are debt securities issued by corporations or governments to raise capital. When you purchase a bond, you lend money to the issuer in exchange for periodic interest payments and the return of the bond's face value at maturity.

How to Earn from Bonds:
1. Purchase Bonds: Buy corporate or government bonds through a broker or directly from the issuer.
2. Hold Until Maturity: Earn regular interest payments, typically semi-annual, until the bond matures.
3. Consider Bond Funds: For diversification, invest in bond mutual funds or ETFs.

Example:
Investing N10,000 in a bond with a 5% annual yield will provide N500 per year in interest payments.

REAL ESTATE
What Is Real Estate Investment?
Real estate investment involves purchasing property to earn rental income or capital appreciation.

How to Earn from Real Estate:
1. Buy Rental Properties: Purchase residential or commercial properties and lease them out.
2. Invest in Real Estate Investment Trusts (REITs): Buy shares in a REIT, which owns and manages income-generating properties.
3. Utilize Real Estate Crowdfunding: Participate in platforms that pool funds from multiple investors to purchase properties.

Example:
Owning a rental property that generates N1,500 in monthly rent can provide a steady income stream. After expenses, the net rental income contributes to your passive earnings.

PEER-TO-PEER LENDING
What Is Peer-to-Peer Lending?
Peer-to-peer (P2P) lending involves lending money directly to individuals or businesses through online platforms, bypassing traditional financial institutions.

How to Earn from Peer-to-Peer Lending:
1. Join a P2P Platform: Sign up on platforms like LendingClub or Prosper.
2. Lend Money: Select loans to invest in based on your risk tolerance and desired returns.
3. Receive Payments: Earn interest payments from borrowers until the loan is repaid.

Example:
Investing N5,000 in a P2P loan with an 8% annual return can yield N400 in interest per year.

CONCLUSION
Investment-based passive income can be a powerful way to build wealth over time. By diversifying your investments across stock dividends, bonds, real estate, and peer-to-peer lending, you can create multiple streams of income with the potential for long-term growth. Stay tuned for the next part of our series, where we will examine additional passive income strategies.

Quote for Motivation:
"Do not wait to strike till the iron is hot; but make it hot by striking." – William Butler Yeats

Invest wisely and start building your passive income portfolio today! I would see you next time.❤️