Saving and working hard will not generate wealth. You have to put your money to work.
Cutting expenses to keep money stored away in your savings account will cost you more in the long run. The best place to put extra cash is in income-generating assets. These assets build value and produce income.
Investing your latte money at $5 a day, five times a week, for 20 years could turn $24,000 worth of latte into nearly $72,000 with an asset that generates a 10% return on investment.
Investing in multiple income-generating assets builds cash flow and minimizes an over-reliance on a signal income stream. You can get started with as little as $5 for many of these. Keep reading to learn more about income-generating assets to diversify your portfolio and build wealth.
What Is An Income-Generating Asset?
Successful investors use income-generating assets to diversify their income. If one income stream falls, another might outperform.
An income-generating asset is an investment that pays you money regularly. You spend money today to acquire something to generate more money in the future.
Some assets require large amounts of startup capital, while others need very little to begin. Consider the money you need to start, time commitment, and potential investment returns when choosing your purchase. This will help you decide whether an investment is the best option for you.
What Are Assets That Generate Income?
You can take advantage of a growing economy and company through stocks. Companies sell stock to the public to raise capital to expand further.
Historically, the stock market has been generous to investors. It’s easy to invest, and the returns tend to be plus or minus 10%. Investing in index funds or exchange-traded funds (ETFs) cuts the risk. It’s key to staying ahead of inflation.
You can buy fractional shares from Charles Schwab, RobinHood, Fidelity, and Interactive Brokers.
2. Dividend stocks
Investors buy dividend stocks for the income it generates. Dividends can be a consistent source of cash flow to help you sustain a lifestyle in retirement or replace earned income.
You don’t need a lot of capital to start. However, some initial research into mature, stable companies with a strong track record of paying dividends is a good idea. These are commonly known as the dividend aristocrats or dividend kings and refer to strong-performing companies that have paid or increased dividends for over 25+ or 50+ years.
Dividend stocks can be a reliable income-generating asset as companies have surpassed their growth phase and focus on returning profits to their investors.
Suppose you’re not ready to purchase stocks. In that case, you can look into dividend-focused ETFs like Vanguard Dividend Appreciation ETF (VIG), Vanguard High Dividend Yield Index ETF (VYM), or Schwab US Dividend Equity ETF (SCHD).
3. Real estate
Real estate is often considered a safe asset. You can create multiple streams of income with real estate. Become a landlord and rent out a property. Buy land and lease it to a farmer. Turn property into a vacation rental.
Everyone needs a place to live and food to eat. As a result, real estate can experience less volatility than other assets such as stocks. This creates a reliable source of income due to consistent demand.
Plus, as an owner with equity in your property, you’ll profit from capital appreciation over time while being able to pay down your mortgage from the rent you collect.
While it’s not a set it and forget it type of investment, the returns can far outweigh the cost, making it rewarding and worthwhile in the long run.
4. Crowdfunded real estate
A popular new way to generate income from assets is crowdfunding. Crowdfunded real estate pools money from a group of investors to purchase a property. Crowdfunding makes it easy for investors with low startup capital to diversify their investment portfolio to grow wealth with real estate.
There’s no need to qualify for a mortgage. As a shareholder in a crowdfunding company, you could own a range of properties from commercial real estate to residential homes without keeping up with maintenance and repairs.
You can use many online platforms, and initial investments can start from $500 for a piece of the property pie. Depending on the type of investment you’re looking to make, here are a few of your options:
- Groundfloor: Best for short-term, high-yield real estate debt investments or fixer-uppers. You can grow your real estate portfolio with as little as $10.
- CrowdStreet: One of the largest real estate investing platforms. Investors with a minimum investment of $25,000 pool money together into private equity real estate projects. As a result, you can build a customized real estate portfolio that allows for broad diversification across multiple locations and sectors.
5. Real Estate Investment Trusts
Real Estate Investment Trusts (REITs) are slightly different from crowdfunding. While crowdfunders invest in a specific property, REIT holders buy stock in a broader real estate company with a portfolio of properties.
Publicly traded REITs: are traded on the stock market. This allows you to actively move in and out of the investment if it doesn’t fit your portfolio. The National Association of Real Estate Investment Trusts (NAREIT) reports more than 200 publicly-traded REITs available on the market. Some popular options include:
- O Realty (O)
- Bluerock Residential Growth REIT
- NexPoint Residential Trust
Public non-traded REITs: aren’t listed on the major stock markets. As a result, they are not registered with the Securities and Exchange Commission (SEC) and face more onerous redemption restrictions that limit their liquidity. Some of these companies operate as crowdfunding sources. However, there are small differences between the two. Here is a list of established public non-traded REITs:
- DiversyFund–Best for buying shares in a portfolio of multi-family units. Each month you receive a portion of rental income that’s automatically reinvested to help you build wealth faster.
- Fundrise–Offers a low-cost, diversified real estate portfolio for the long term. You choose your investment strategy, while new assets are added automatically over time.
- RealtyMogul–Operates as a crowdfunding and REIT platform. Investors invest in a REIT with one or more properties to build their own personal portfolio. Investors choose a single property as crowdfunding or multiple properties through a pre-established REIT.
Probably not the first asset that comes to mind when you think about income-generating, but farmland can produce income, and its demand is constant. Investors can buy farmland to lease to farming companies or invest in a REIT or crowdfunding platform that buys farmland to rent.
However, it involves risk. For example, a farmer could have a poor harvest one year, or tenants may be unable to make rent payments during an economic downturn. At some point, there’ll be maintenance costs and repairs required. It can become stressful and potentially burn a hole in your wallet.
FarmTogether is a crowdfunding platform that invests in US Farmland by pooling the investments of multiple investors. You can get started with $10,000.
Royalties are payments you receive by giving someone else permission to use or profit from intellectual property or assets you own. Royalties can also apply to trademarks, natural resources, and art, commonly associated with books and songwriting.
Compared to other income-generating assets, royalties are a low-risk, safe investment as they remain unaffected by volatility in the market or economic downturns. However, royalties can decrease over time, especially for music and art, where popularity can fall considerably after the first 12 months.
If you have a product that you want to sell, you may earn royalty income for years to come.
8. Peer-to-peer lending
Sometimes referred to as crowdlending, peer-to-peer lenders loan money to borrowers that later repay the principal with interest. Lenders can charge high-interest rates as borrowers typically need the cash urgently.
However, often the borrower may have a poor credit rating which can increase the odds of missed payments and default. So if you’re considering peer-to-peer lending, it’s important to note that you may not get full repayment of the loan, and it can be very high-risk.
Popular platforms for peer-to-peer lending include SoFi, LendingClub, and Prosper.
9. Start a business
Approximately 66% of millionaires in the US generate wealth through a self-owned business. What would you be good at doing?
Online businesses can range from selling products on Etsy, affiliate marketing, starting a blog, and selling digital designs. Or if you have a particular skill set, you could pursue freelance opportunities, and sell your expertise in professional services such as graphic design or copywriting. You could open a local business such as a restaurant, bakery, coffee shop, laundromat, or fitness studio. So many options to choose from starting.
Owning a business requires upfront work, time, and capital. It may take years before you start to see a return on the investment.
It’s essential to research ideas and your target market first. Once you build momentum, a business can be a profitable income-generating asset that you can run passively on the side.
10. Invest in a small business
If running a business feels too risky, consider investing in another small business. Crowdfunding platforms such as MainVest allow investors to lend money to local companies that seek capital to grow.
MainVest will vet the businesses on the platform allowing you to make informed investment decisions. With as little as $100, you can invest across many industries, including hospitality, real estate, and retail businesses.
There are six ways to earn passive income on your cryptocurrency. Aside from the asset increasing in value over time, you can:
- Earn interest from Proof-of-stake staking. As a crypto validator, you can earn interest on your crypto that is used to validate digital assets.
- Hold your crypto in an interest-bearing digital asset account. Account-holders with BlockFi, Nexo, Celsius Network, and others can earn interest when they store their crypto assets. Instead of storing assets in a digital wallet, storing them in these interest-bearing accounts deposits a predefined interest rate daily, weekly, monthly, or yearly into your account.
- Participate in ieer-to-peer lending. Platforms like DeFi allow you to lend your cryptocurrency using self-executing contracts. Interest rates may be fixed with lock-up periods.
- Try cloud mining. Unlike proof-of-stake staking, cloud mining allows you to mine for cryptocurrencies like Bitcoin. It requires miners to invest in powerful computers that may exacerbate electricity bills.
- Consider yield farming. Here you can use a combination of smart contracts to trade against funds made by investors. Liquidity provides investors to receive a portion of the trading fees from the pool.
12. Non-Fungible Tokens (NFTs)
NFTs are the latest digital collectible to hit the market. Popularized by several professional sports teams, athletes, actors, and businesses, NFTs are an exciting commodity to own as they sell anywhere from a few dollars to millions of dollars.
Although their value hasn’t been established, NFTs represent the future. So if you like alternative investments and have some extra money to invest, check out NFTs (as a high-risk investment).
NFTs are digital collectibles that contain a piece of art, music, real estate, video, or a tweet on the blockchain. They can take the form of a jpeg, video, or audio clip and their value rests in a single owner (thanks to a unique code assigned to each token). Reproductions do not carry any value.
You’ll find NFTs in marketplaces that trade Ethereum. Check out OpenSea, Axie Infinity, Larva Labs, NBA Top Shot, and Rarible to name a few. Crypto exchanges like Coinbase also make it easier to buy and sell NFTs.
13. Certificates of deposits (CDs)
A certificate of deposit or CD provides a fixed interest rate with a fixed withdrawal date. The asset generates income over time as the CD earns interest. Returns are generally low (1-2.5%). However, this asset is considered low-risk, guaranteed by the terms, and is backed by the Federal Deposit Insurance Corporation (FDIC).
14. Social media accounts
Have you considered using your social media accounts as an income-generating asset? The potential to scale your income is limitless. While the dollar amount might start small, as your following and engagement grow, so will your income. Here are a few ideas to get you started:
- Monetize YouTube videos
- Promote and sell products through Instagram
- Join the TikTok Creator Fund
- Build a brand on Twitter and make sales through affiliate marketing
- Brand sponsorships and product reviews
You don’t need 100,000 followers to get started. However, an engaged audience in a profitable niche will go a long way in producing an alternative income stream.
15. Money market accounts
Money market accounts offer better rates of return than savings accounts. It can be a safe place for risk-averse investors to keep a large chunk of money and earn some cash flow. However, balance requirements can be high, and some accounts may carry monthly fees.
16. Digital Designs
Let your creativity pay you dividends by selling your work to people worldwide. Digital designs are electronically transferred, which means there’s no excuse. And you can use modern technology to create media for news outlets, bloggers, advertisers, or as a form of content creation.
My favorite income-generating asset is a blog. The future is digital. Now is the time to capitalize on what you know in the form of a blog. You have something to share with the world.
Add great content to your blog, and your audience will grow. You can monetize this asset with ads, sponsored posts, affiliate marketing, courses, membership clubs, and so much more. It’s whatever you want it to be. And it’s yours.
You have a few different ways to monetize websites. First, you can buy domain addresses that you can sell for a higher price. Second, you can buy websites that you will sell after flipping them or building them from scratch.
You can also build a website to monetize through affiliate marketing that isn’t quite a blog but more of a website that provides consumers with in-depth information and reviews on products they may want to buy.
Investors have long bought art for its ability to increase in value over time. The Salvator Mundi by Leonardi da Vinci sold for $450 million in 2016.
Today you have more options than buying pieces of art low and selling high. Masterworks allows you to invest in fine art by buying shares of art. You can build a portfolio of art pieces. Masterworks purchases the art and holds the artwork for 3-10 years. Once the paintings are sold, you have the option to collect money. Of course, you can always sell your shares on the secondary market beforehand if you like.
Masterworks is risky and associated with higher fees than other investments and minimal customer support. However, it’s easy to use with no minimum investment and transaction fees.
Art is a promising investment to hedge against the stock market—something to consider if you’re looking to diversify your portfolio.
Wine is an alternative investment option that may protect your investments against stock market volatility. In addition, physical commodities tend to outperform equities during inflation and offer investors an excellent opportunity to diversify their portfolios.
The most expensive wine is the 1945 Domaine de la Romanée-Conti which sold for $558,000. However, investors can invest in wine indirectly through exchange-traded funds (ETFs) like the Liv-ex Fine Wine 100 or platforms like Vinfolio.
Investing in wine is likely to require a large amount of capital upfront. However, it’s an option you may consider with a lot of homework.
Investors make a series of investments (payments) to an insurance company in exchange for income in the future. Annuities accrue tax-deferred and can only be withdrawn after 591/2 years of age. Annuity contracts earn interest and provide a guaranteed income stream for a predetermined amount of time for retirees.
You can buy annuities through online brokerage platforms like Fidelity, Charles Schwab, and TD Ameritrade.
21. Items to rent
Did you know you can rent out your car, tools, home, and so much more? Of course, you need these things, but how about making extra money with them when you don’t.
You can make up to $1,200 a month renting out your car with HyreCar. It’s a ridesharing marketplace to connect car owners with renters.
You can also buy inflatable jungle gyms and rent them out to the parents in your neighborhood. Or how about the tools that you have in your shed. They can be pretty costly, so spread the cost amongst yourself and your friends.
Lastly, Airbnbs are becoming increasingly popular for a reason. Make some extra money renting out your house when you’re out of town on a vacation of your own. This will help you cover the cost for
When you create products like books or music, you can earn royalties that provide income for years and generations to come. If you have a creative spark that needs to be shared with the world, consider an asset like a book, music, piece of art, jewelry that you design to be sold over and over again for royalty income.
23. High Yield Savings Account
Although certainly not the most lucrative of assets to own, a high yield savings account will generate money for you, and it’s better than a traditional savings account. A high yield savings account could be a good option if you need cash put aside in a low-risk account. Here your money is making some money while you have easy access.
What Are The Assets With The Highest Returns?
Successful investors weigh opportunities as risks versus rewards. Certain assets can generate a high rate of return, while others may have a slower upside. However, the risk is not the same.
During the past five years, cryptocurrencies and NFTs have provided some of the most profitable returns. Early investors have gained astronomical returns in a volatile market with 10-50% fluctuations in a given year (both profits and losses).
Stocks and index funds have also provided consistent gains, with the S&P 500 averaging 9.4% over the past 50 years. Although there are no profit guarantees with stocks, the benefits outweigh the risks when buying great companies or broad market indexes.
Alternative investments such as fine art and wine have also generated significant returns on long-term investments, but lower than stocks.
Investing in yourself a small business or royalties gives you control over your returns. And there are so many assets listed here that could earn you some side hustle money to invest without taking away from your salary and paying your bills.
Is There Additional Work Needed To Maintain Assets?
Some assets require more maintenance than others. Many will not require additional capital like stocks, annuities, bonds. However, they come with expense fees that take part of your profits.
Others may require additional capital to maintain, like real estate property, a business, a website, items you’re renting out.
Be sure to consider the cost of maintaining an asset when making your purchase.
The Bottom Line
The opportunities to invest in income-generating assets are almost endless. The key is to diversify your investments and avoid relying on one income source. There may be times when a particular investment asset outperforms due to market conditions and growth is stagnant.
Carefully consider your investment goals, risk tolerance, and the amount of time you have to commit. Even small amounts invested each month consistently can get you one step closer to financial freedom!
Theresa is a personal finance blogger. She writes content for busy professional women to take control of their money and investments. She enjoys reading, traveling, cooking, and writing. Her work has been featured on GoBanking Rates, Your Money Geek, Savoteur, the Corporate Quitter, Thirty Eight Investing, and more.