Invest your money on something that will make it grow
Financial advisers have said this a million times: “Let your money work for you.” This can mean a lot of things—from as simple as opening a savings account to investing in pooled funds or VUL funds. Basically, what the phrase is saying is put that money somewhere it can grow.
For busy individuals like full-time employees and businessmen, it's quite challenging to invest because it takes time and effort. But aside from having a fund manager, there are other ways to make money grow, even while you sleep.
According to financial expert, Fitz Gerard Villafuerte, there are several ways to make money that require little to no effort. As founder of Wealth Arki, a financial planning and wealth management company, he helps people manage finances and find the best investment practices for them.
There are various strategies where one can put that extra money to create a secondary source of income. Because these days, having one source of income is not enough to achieve total financial freedom.
Passive income is a type of income source that requires little to no effort to earn and maintain. This is a secondary income source for those who are looking to earn more while working or managing a business.
However, Villafuerte clarifies that passive income also requires work. It takes time to build a passive income and people need to do the work first in the beginning before reaping the rewards.
“It’s like planting a pear tree. You’ll need to tend to it for about three years before it bears fruit. But after that, you don’t have to do much because pear trees are low-maintenance, and you’ll have a steady supply of pear fruits for many years,” he says.
One of the ways is investing in paper assets like stocks and bonds. This needs a lot of research and studying but there's a lot of available materials online. There are even computer applications that help newbie investors. Getting advice from financial experts helps as well.
“You can try investing in paper assets. When you own shares of a company in the stock market, you can earn from price appreciation of the share price, and you can receive dividends,” Villafuerte explains.
While opening a savings account is a form of passive income, it's not the best option out there. Banks offer small interest rates and it takes a lot of time to earn from it. So aside from opening a savings account, try opening a high-interest time deposit to really earn that money. Or invest in managed VUL funds and be benefited with the skills of the professional fund managers.
“Of course, even a savings account is a source of passive income because you earn interests just by letting your money stay there. The only downside is that inflation will eventually eat the value of your money if it stays in the savings account too long,” he says.
“So it’s best to put your money in better investments such as stocks, bonds, and VUL funds, which often outpace inflation,” he adds.
Then there's hard assets. These assets are the tangible things that people invest in like property or land, gold, diamonds, luxury items, etc.
People buy these valuable items because it usually increases in value over time. This means that these items “earn” when their values increase and exceed whatever the amount was spent in the initial purchase. These items are also desirable to a lot of people making their market value very high.
One good example of hard asset is property. Acquiring a property is one of the best investments anyone could get. Land or property value increase as time passes and depending on the location. Owners can also lease or rent out these properties creating passive income. Listing down the property in popular homestay online marketplace Airbnb almost always guarantees extra income to owners.
These days, having an extra vehicle can also be a source of passive income. Car owners can register their cars on ride-hailing apps like Grab, then hire a driver who can do the work and earn some extra cash.
A lot of people earn from online work nowadays and some of the richest individuals on the planet source their money from the internet. YouTube has become a good source of income but this takes a bit of effort than most passive income methods.
YouTube channels need video content so this needs to be created. But once the channel gets monetized, the “creators” earn money from advertisements played on their videos. Even if the creators only upload once in a while, previous videos still earn in the background. Essentially, these videos make money for creators who usually still have day jobs.
On the other hand, online selling needs more effort as well but it is still considered a passive income. It's not as stable as other sources but it is extra income nonetheless.
Ultimately, choosing the best passive income is a choice. Some works for others while some don't. It depends on how proactive of an investor someone is. Let your broker or fund manager do all the work or make an effort to be part of the investment strategy.