In this age of austerity, having a single source of income is not always enough to make ends meet. Sometimes, you need to invest your earnings to generate a cash flow that can assist you with fulfilling monthly financial requirements, while also guaranteeing a financially secure future.
As a result, there are several investment opportunities that you can consider for yourself. Refer to the following guide to educate yourself on various investment platforms, as well as the risks associated with them.
Investing in Bonds
If you have some money saved, investing in a bond can be a safer option. Bonds are basically an amount of money that you loan out to either the government (these are called ‘gilts’) or a company (also known as ‘corporate bonds’). This loan is extended for a specific period of time. Typically, short-term bonds mature over a period ranging from at least one to three years. On the other hand, long-term bonds mature around the time frame of ten years or longer. The risk factor concerning long-term bonds is relatively higher in contrast to the short-term bond.
Once you invest in a bond, you can generate monthly income in the form of interest. Based on the amount you invested, you can receive an interest payment (referred to as ‘coupons’), every month. The rate of interest is fixed. This suggests that you receive a standard amount of monthly income after you make your investment. However, the initial amount of money that you loaned out can only be withdrawn after the agreed-upon period has concluded. Hence, if you purchased a bond with a five-year maturity plan, you can get your investment back in five years’ time.
Having said that, you still have the option to sell the bond before the stimulatory period concludes. Although, in this case, the amount of money that is returned may not be equal to the amount you initially paid. This is because the value of the bond is now determined by the open market, which changes in accordance with the interest rate, inflation, along with the alteration in supply and demand.
Taking the invested figure into the account, there are two types of bonds.
- An investment-grade bond: An investment-grade bond is ideal for you if you want to put your money towards something that comes with reduced risks. However, the downside of this bond is that the interest payment received is relatively less.
- A high-yield bond: A high-yield bond coincides with a greater degree of risks. Conversely, the interest payments in this type of bond are higher.
Keeping this in mind, there is a certain level of risk involved in purchasing a bond. Typically, government bonds are slightly safer, as they fall in the AAA or AA credit rating. Whereas the corporate bonds have a higher degree of risk, but you can always assess the company’s credit history and cash flow position before making a decision.
If you are considering investing in a bond, make sure that you conduct your research regarding the institution you are lending your money to. This way, you can eliminate potential risks and ensure a higher chance to retrieve your investments in the long run.
Dividends (Passive Income)
Dividend investing is a way of investing money in a company’s stock (i.e. owning a piece of the company). If the company makes a profit, a dividend is paid as a share of the profit. This allows you to attain a return on your investment. Typically, dividend is paid on a quarterly basis, however, some companies do payout semiannually.
Dividend investing is a smart option, as you can initiate by putting in a small sum of money and can continue to re-invest the income and purchase more shares in the company. However, before you invest, have a look at the following tips.
Do your homework
Prior to investing in a company, you must study the industry, the company’s profitability and dividend payments history. All of this should be considered with the state of the overall economy in mind.
Understand the industry. If it is in fragile or unstable, this will affect the overall profitability of the company and subsequently dividends. Similarly, you further need to assess if the firm has consistent profitability record. Be sure to select an institution that holds a consistent record of paying out dividends. It is recommended to invest in firms that 50% or less of its earnings as dividends. This is because even if the business experiences a decrease of profit in the short run, they may still be able to make a dividend payout.
Pick the right strategy for yourself
When it comes to dividend investing, you can try out one of the two strategies – the high dividend yield strategy and high dividend growth rate strategy.
High Dividend Yield Approach
In the high dividend yield approach, you aim to find companies with low valuations and consistent high dividend yield and payout. This improves your return i.e. higher dividend yield as company increases the dividend over time.
High Dividend Growth Rate
On the other hand, by using the high dividend growth rate strategy, you find companies that have a solid balance sheet, experiencing rapid growth rate but pay less than average dividend. This strategy is better suited for a long-term income plan as it allows you to buy a stock at a cheaper rate but yielding higher dividends in the future.
Sign up for Real Estate Investments Trust (REITs)
A real estate investment trust (REIT) is quite similar to dividend investments as you receive a certain amount after investing in a company’s stocks. However, REIT firms exclusively deal in the real estate industry, which includes buying, selling, leasing and renting properties. The real estate investment trust functions like a mutual fund, however, these companies invest in properties instead of stocks. With REIT, you can put in money as an individual investor. Investing the funds raised, the REIT companies acquire properties which are rented out. Profits are made through rental income and growth in property value.
Most REITs specialize in the specific subdivision of the real estate industry. Generally, they fall under the two categories:
Equity Real Estate Investment Trust
Equity REITs include those companies which allocate their investment to owning physical properties. They profit through rentals and leasing out commercial space that they initially purchased. The income is then returned to the investors in the form of dividends. Commonly, equity REITs are publicly traded.
Mortgage Real Estate Investment Trust (mREIT)
The mortgage real estate investment trust is firms which invest in mortgages or mortgage-backed securities. Instead of making a profit by renting or leasing space, these companies earn through the interest from mortgages. This is because the firm doesn’t actually have ownership of the physical property, instead, it loans money to the real estate developer.
Choosing REIT is a suitable option if you lack the money to purchase real estate properties yourself. This allows you to make a minimal investment and still get an income on the amount you invest in.
Profiting through P2P lending
With Peer-to-Peer lending (P2), you can make money on a monthly basis through earning interest on the money you lend as a loan. In this type of lending, you are directly able to lend your money to the borrower, without the need to engage any financial institution. Normally, when you give your money to the bank, you are given an interest rate of an amount that is significantly less than what the bank is making. However, as Peer-to-Peer platforms eliminate the need of financial intermediary and enables lender to benefit from better rate of interest on the loaned amount.
While there is no need for a financial institution, P2P lending still requires a platform that allows you to connect with the borrowers. Currently, there are several P2P platforms available on the market. It is important to conduct thorough research before selecting a platform to lend your hard-earned money.
With that said, there is a certain degree of risk involved in P2P lending. This is due to the fact that the if borrower misses a payment, you may earn less than advertised or may default on the loaned money and you may never get your money back. To reduce that risk, it is imperative to conduct background research on the lending platform and borrower, while also examining their business portfolio and credit history. With this information, you can make an educated decision to give out loans to individuals or companies that you deem reliable.
Peer-to-Peer lending strategies are quite advantageous as they fall in the middle of the scale for liquidity, safety, and interest rate. With P2P, your assets may not be illiquid, but they are relatively liquid. Similarly, when it comes to safety, P2P lending involves a lesser degree of risks in contrast to investing in real estate. Hence, it is relatively safer than other forms of long-term investments. Lastly, if you lend money through a Peer-to-Peer platform, you can earn a higher rate of interest, in contrast to what you would make with your money sitting in a bank.
Buy Social Media Pages and Sell Shoutouts
Currently, social media platforms are ruling over the business world. If any company desires to gain exposure and market their products or services, they usually contact sponsors or influencers to promote their brand so that their product is visible to a wider audience. Having a social media page with a solid followers’ base and almost guarantee a consistent monthly income from shoutouts and brand promotions.
Keeping this in mind, investment in social media pages can be extremely lucrative. The purpose of buying social media accounts is to profit from them by charging brands and businesses for a shoutout.
Shoutouts are basically a way to market a product by endorsing it on a social media page. Shoutouts can increase a business’ visibility and can help them gain more customers, as people are likely to trust influencers when selecting a brand. You can purchase social media pages that already have a few thousand to a million+ followers. This enables you to fast track your branding strategies, without having to deal with the pressure of building a following.
When you are considering investing in social media pages, take the following factors into account:
- Is the account handle attractive enough?
For the investment to pay off, you need to buy an account that has an attractive handle or title. In the case of social media branding, companies look for accounts that have a steady growth of followers. You need to make sure that the account’s handle is creative enough to captivate more followers in the future.
- How many followers does the account have?
The next thing that you need to consider is whether the account has enough followers for it to be reached out by businesses. Commonly, it is recommended to buy a page with over fifty thousand to a million followers. The more followers you have, the more you can charge for a shoutout.
- Is the audience your target demographic?
Before buying an account, it is important to consider whether the followers of the account are in the appropriate target demographics for the industry you want to deal in. It is recommended to pick an account with a youthful audience, as brands looking for shoutouts usually sell to the younger generation. However, other factors, such as the geographical location and interest should further be considered.
- What social media platforms should you consider?
There are several social media platforms that you can use to sell shout outs. The most popular platforms include Instagram, TikTok, Twitter, Facebook, and YouTube. You can make a selection, depending on the type of audience you are targeting.
Investing in a social media page involves some degree of risk as well. If you do not consistently post relevant content, you risk of losing your followers. Your investment would go to waste if the brands are unwilling to work with you. Considering this, you should only invest in the niche specific social media pages, add interactive and engaging content to guarantee to retain and increase the followers, and to have a consistent monthly income.
Purchase and Lease Premium Domains
Popular domain names can be leased at a high rate. Premium domain names are those which hold the potential to become popular. Typically, popular domains are usually precise, hold a better chance of ranking high in the search results, and are easy to memorize with popular extensions. Once you buy a domain, you can lease it to brands or businesses and charge rent in return. This can result in regular monthly income in exchange for your investment.
The initial cost of purchasing a premium domain could be relatively high. However, if you lease it at an appropriate price range, you can earn a decent monthly income on your investment, passively.
You can purchase premium domain by either buying from existing owners or by directly purchasing from the registry.
Premium domains that are sold by the owners require you to pay a one-time purchase fee, whereas, if you buy directly from the Registry, you would have to pay a higher price, along with maintenance cost (this includes renewal and transfer payments). This is due to the fact that the Registry-featured domain names are new domains that are highlighted as premiums, as a result of their high value and demand.
You can purchase a premium domain from a renowned registrar, such as GoDaddy. However, you can also use an online platform, such as Sedo, that facilitate the transaction of the domain name.
Purchasing a domain is relatively risky as you do not have the luxury of easily liquidating your investment. If you desire to sell your domain you would have to find a buyer who is willing to pay for it. Usually, this can be extremely difficult. In addition to this, buying a popular domain can be a gamble from a legal perspective. This is because some premium domains are quite similar to trademarked domains. Claiming ownership of these names may sometimes force you to give up the name for free in the unfortunate case of a lawsuit. Additionally, your ability to make a profit off of the purchased domain is a risk in itself. When you make the purchase, it is difficult to determine if there is a company that is willing to lease the name from you.
The best way to make a monthly income is to buy domains that phonetically sounds like a brand or one or two letter word. Since they are easy to remember, they can be leased out for a decent monthly fee. Another trick is to buy domains that sounds similar to Chinese surnames. They are really high in demand.
Start an Online Business
Starting a business online is a reliable option for investing your hard-earned money. If you are worried about placing your cash in the hands of a stranger, your own online venture can be a suitable option.
An online business doesn’t necessarily have to be an eCommerce brand. In fact, you can also earn an income by starting a blog.
Blogging has become extremely popular in recent years. For businesses to gain recognition and visibility online, they need to have a blog on their website. You can either start your own blog or provide a blog writing service. If you choose to create your own blog, you can earn a profit by sponsoring products and brands through your writing. Companies pay popular bloggers a large sum of money to promote their products and services. If you lack proficiency in writing, you can hire a writer to work with you.
Additionally, if your business idea is to become a blog-writing service provider, you can charge companies to write blogs for their websites. To implement this initiative, you would need a sales team, a team of writers, and an SEO service to promote your business.
Either way, investing in a blogging business can come with a risk, as you do not have the certainty in knowing whether your blog would be popular. However, effective keyword research and consistent content creation with a targeted audience in mind will pay off in the long run.
Start an eCommerce business
E-commerce is one of the fastest-growing industry. You can start an eCommerce business by investing in a particular product that you think can sell well online. For this to work, you would have to come up with certain strategies that allow you to stay ahead of the competition. These may include coming up with a novel product, which has a higher demand in the market. If you decide to invest in an eCommerce business, you would need to offer high quality products and go above and beyond customers’ expectation. However, akin to all other types of business, all eCommerce businesses can be a gamble.
Invest in Real Estate
If you have enough money saved to invest in real estate, you can earn a decent amount by investing in buy-to-let properties. These could be houses, flats or shops that you purchase to put on rent. The rent obtained from the property can be a consistent monthly source of income.
If you do not want to have a hands-on responsibility in the real estate business, you can take assistance from a letting agency. A letting agent can put in the groundwork, such as conducting credit checks on potential tenants, creating contracts, collecting rent, dealing with on-site issues and curating contract agreements. However, these services typically charge a percentage from your monthly rental income.
While investing in real estate yields a high profit, it can also come with some risks. Risks in real estate include tenants damaging your property, defaulting on rent, rising interest rate, losing property value over time (negative equity), etc.
Making an investment to attain a monthly income is not easy but certainly possible. Whether you choose to buy bonds or shares, give out loans, seek business opportunities online or try your luck in real estate, you would have to assess and negate potential risks. However, without taking chances, you will not be able to reap the rewards. Therefore, consider the aforementioned tips and select an investment option that works for you!