Cash keeps the world going round. Whether you are a passive investor, content to park a significant amount of savings in a few assets and forget about it until a few years later, or you’re a day trader living life on the fast lane, constantly checking your portfolio every hour, you need cash to survive, and a steady cash flow can guarantee your bills will be paid. With that said, if you’re an investor who’s done with working full-time in the office, what are some income-generating asset classes that you can rely on?
High-Yield Savings Accounts: Steady Returns
For starters, you have high-yield savings accounts, which are federally insured savings accounts that provide you with higher interest rates compared to normal savings accounts. While a normal savings account pays you 0.1% interest per annum, a high-yield savings account can offer you up to 3% interest per annum, generating 30 times more without any additional effort on your part.
Dividend-Paying Stocks: Unlocking Higher Potential
If you are looking for something with higher potential, then dividend-paying stocks are the way to go. While these stocks are usually offered by more established companies, the percentage rate for your dividends (dividend yield) can vary from company to company. That said, companies with a good track record of consistent earnings that pay shareholders dividends regularly are referred to as “blue-chip stocks,” which you should be on the lookout for if you prefer a safer bet.
Bonds: Stability and Predictability
Then we have bonds, which are often regarded as the salt to stocks’ pepper. Unlike stocks, which essentially represent a small percentage of ownership in a particular company, bonds act as loans that an investor gives to a company for a specific period of time. Over that period, the company will pay you a fixed amount regularly (known as a coupon rate), and at the end of the agreed-upon period, the company will pay you back the initial loan amount. This is one of the reasons why some investors prefer bonds over stocks since they are much more stable, and you’ll know exactly how much money you can expect in return.
Real Estate: Tangible Investment Opportunity
For something more tangible, real estate is a great investment opportunity that you can directly influence. When you own property, chances are that your asset will naturally appreciate in value, and during that time, you can rent the property to tenants, generating income from the monthly rent you collect. With that in mind, some investors are often cautious about real estate due to potentially high renovation costs and the possibility of troublesome tenants that may make rent collections difficult.
Investing in SMEs or Equity Crowdfunding: Empowering Communities
If you’re like us at PEGH and would like to do your part to help support smaller businesses, then you can also consider investing in SMEs or Equity Crowdfunding, which directly impact the communities they are a part of, besides helping you earn some extra income. While there is undeniably a strong element of risk, given that many small businesses tend to fail, some can also beat the odds and significantly multiply your principal investment amount when they succeed. If you prefer to share the burden of risk, there are also multiple small business crowdfunding platforms, such as pitchIN, which allows you to contribute a smaller percentage to an upcoming investment opportunity that you believe in. That being said, many SMEs listed are more focused on growth and not immediate returns, which means they are unlikely to pay out dividends, so choose wisely.
While everyone loves the idea of earning money while they sleep, the reality is that income-generating investments often involve a lot of risk and research. Any smart investor will always remind you never to put all your eggs in one basket, and that goes doubly so for cash flow assets. Therefore, it can be a good idea to diversify your portfolio with several of the above asset classes.
Meanwhile, if you feel like levelling up your financial literacy and exploring new ideas to grow your wealth, be sure to hang around and learn more from us at PEGH, where we delve into investment opportunities in Malaysia and topics surrounding ESG (Environmental, Social, and Governance).
Remember, educated investments lead to greater financial security and prosperity!
