What is passive income?
You can best describe passive income as income that you receive without having to actively work for it. The idea behind passive income is that in this way you can build up an income stream that will continue to come in almost automatically over time. This can be useful if you are looking for a way to build financial security. Or if you want to work towards financial independence.
What are the best strategies to earn passive income?
There are several strategies you can use to earn passive income. Which strategy is best for you depends on several factors. Such as your financial resources, your knowledge and experience and your goals. We’ve listed the best strategies for you to consider:
1: Investing in crypto
When we look at the return figures of various financial assets, crypto has proven to be the best investment in the longer term. For example, the Bitcoin price has risen in the past 10 years from less than $100 to $69,000 in 2021. This means that if you had bought Bitcoin for $1,000 10 years ago, you would have had $690,000 in your bank account around the peak. Investing in crypto can be done in different ways, and it is important to choose your entry point carefully. Preferably when the price is relatively low again. You can invest in crypto via:
Buy crypto for the long term hold
You purchase Bitcoin and various altcoins to leave them in your wallet for a longer period of time. It is important to first compare different providers before making your purchase. Fortunately, we have already done that for you and we can say that it is best to go to Bitvavo at the moment. You can read that in our Bitvavo review. First create an account with Bitvavo, and use our Bitvavo manual to guide you step-by-step to your first purchase.
Crypto staking
With crypto staking you lock up the purchased coins for a certain period so that they can be used to validate transactions on the underlying blockchain. You will receive compensation for this in the form of interest. The compensation is paid in the unit of coins you have secured. It is good to know that you can also go to Bitvavo for crypto staking. Read more about crypto staking here.
Crypto earn
With crypto earn, just like with crypto staking, you lock your coins on an exchange for a certain period. In this case, your coins are used by the exchange to make financial obligations elsewhere. The reward you get for this is identical to crypto staking. Namely in the form of interest. Read more about crypto earn here.
2: Investing in shares or bonds
By purchasing shares you acquire ownership rights in a company. Bonds are loans issued by companies or governments. We explain both options below:
Shares
When you buy shares, you participate in the ownership of a company and can benefit from the profits that the company makes. If the company performs well, the value of your shares may increase. Which means you can later sell them for more money than you paid for them. However, if the company performs poorly, the value of your shares may drop.
Bonds
These are loans issued by companies or governments. When you buy bonds you lend money to the company or the government. In return you receive interest. The interest you receive depends on the term of the bond and the interest rate that has been agreed. At the end of the term, the company or government must repay the borrowed money.
There are different ways to invest in shares or bonds. This depends on your financial resources and your goals. For example, you can buy shares or bonds of a single company or country, or you can invest money in investment funds.
3: Investing and renting out real estate
You earn passive income by investing money in buying a house or apartment. You then rent this to tenants. As the owner of the property, you are responsible for its maintenance and rental. You receive rental income from the tenants for this.
There are different ways to invest in real estate. For example, you can buy a house or apartment and rent it out yourself. Or you can invest money in a real estate fund that invests in real estate.
4: Setting up a dropshipping business
With a dropshipping company, you sell products that you don’t have to own or ship. You only pay the supplier when a customer places an order, so you don’t have to stockpile.
5: Selling digital products
If you are good at creating e-books, video courses or music, for example, you can sell these products as a source of passive income.
6: Investing in peer-to-peer lending:
By investing in peer-to-peer lending you can lend money to other people and earn interest on it. This is a form of passive income, but it is important to remember that there is always some risk that you will not get back the money you borrowed.
It is good to know that building passive income often takes time and effort. It is not always easy to build a stable income stream in this way. That is why it is wise to carefully consider which strategy suits you best. And to delve into the different options before making a decision. If you opt for our first choice crypto, first create an account with the Netherlands’ largest crypto provider Bitvavo.
