Using passive investments as a second income stream
A common misconception is that you must be making a lot of money to diversify your income stream, says Standard Bank
If you’re looking for ways to make extra money without the hassle of a side hustle, investments may be the way to go. In the current economic climate, consumers need to be WalletWise, and this comes with a lot of financial education, discipline and consistency. A financial consultant can help you turn your investments into a second income stream.
Investments are usually seen as financial tools that are set up for a longer time period, usually to ensure you retire comfortably. However, there are a few investment options that could help you grow your financial portfolio.
Zie Moyo, client solution owner for savings and investments at Standard Bank, says a common misconception is that you must be making a lot of money to diversify your income stream through investments. This is not the case.
“There’s great opportunity for people to invest whatever they have and make more out of it. It’s a matter of exploring options and learning about these various options,” says Moyo.
If you’re looking for higher returns and are not risk averse, dividend stocks are a great way to create a second income stream. Do not let this term terrify you: it is simple and straightforward. You can purchase stocks from publicly traded companies, and as these companies generate profit, so will you. Now, the trick is that the payouts, formally termed as dividends, vary from company to company and may be paid out quarterly or annually.
Many young professionals decide on buying or renting property once they have a financially stable job, and this is nothing to be frowned upon. However, to be WalletWise means to look at the bigger picture. If you can afford to buy an affordable apartment, you can generate an additional income from renting it out. Granted, there are costs to factor in when you put together your rental agreement.
There are many investment options to consider that will bring in some income, such as fixed deposits where your money is locked in for a period of time to get a higher interest rate. A notice deposit savings account allows you to access your funds after placing a notice period, to earn a competitive interest rate. A tax-free savings account is an ideal long-term savings option where interest earned, capital gains and dividend income is free from taxes.
The income from these savings and investment accounts may not be as high as what could be gained from higher-risk investment options, but they are still worthwhile because your capital is usually guaranteed.
While there are many more investment options to consider, it’s important to take some time to fully understand what your options are and find the best way to maximise your potential second income stream.
Consider your appetite for risk and analyse whether you can afford to aim high, or steadily rake in interests from low-risk investments. Remember to make the right decision suitable for your pockets and always be WalletWise.
This article was paid for by Standard Bank.