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5 time tested Passive income strategies to build wealth

Passive income is a term used to describe a stream of income that is earned without the need for active involvement or participation. This type of income is highly desirable as it allows individuals to earn money while focusing on other activities, such as pursuing other business ventures or spending time with family and friends.

There are numerous ways to generate passive income, and the best strategies often depend on an individual's personal circumstances, risk tolerance, and investment goals. However, based on the last five years of trends, the following five strategies have been particularly effective for generating passive income:

  1. Real Estate Investing: Investing in real estate has long been a popular way to generate passive income. In recent years, platforms like Fundrise and Roofstock have made it easier for individuals to invest in real estate without the need to manage properties themselves. According to Fundrise, their eREITs have provided returns of 8-11% annually since their inception in 2012. Roofstock claims that the average annual return for their investors is around 8%.

  2. Dividend Investing: Investing in dividend-paying stocks or exchange-traded funds (ETFs) is another popular way to generate passive income. Dividend-paying stocks provide regular income in the form of dividends, which are typically paid quarterly. According to data from S&P Global, the average annual return for dividend-paying stocks has been around 2-3% higher than the overall stock market in the last 5 years.

  3. Peer-to-Peer Lending: Peer-to-peer (P2P) lending platforms, such as Lending Club and Prosper, allow individuals to lend money to other individuals or small businesses. These platforms typically offer higher returns than traditional savings accounts or bonds, with average annual returns in the range of 5-8% according to Lending Club and 6.95% according to Prosper.

  4. Creating and Monetizing an Online Course or Membership Website: With the rise of online learning platforms like Udemy and Skillshare, creating and monetizing an online course or membership website has become a popular way to generate passive income. The earning potential can be substantial, with some course creators earning six-figure incomes.

  5. Investing in Rental Properties: Investing in rental properties is another way to generate passive income. Rental properties can provide a steady stream of income in the form of rent, and over time the value of the property may appreciate, resulting in capital gains. According to data from Mashvisor, the average annual return on rental properties in the US has been around 7-8% in the last 5 years.

It's important to note that these strategies come with different levels of risk and return, therefore, it's always important to do your own research and consult with a financial advisor before making any investments. Additionally, past performance is not a guarantee of future returns and these numbers are just averages and may not necessarily reflect an individual's personal experience.

In conclusion, the five strategies listed above have proven to be effective ways to generate passive income over the last five years. Whether you are looking to invest in real estate, stocks, or rental properties, or create an online course or membership website, there are many opportunities to generate passive income. As always, it is important to do your own research, consult with a financial advisor, and consider your personal circumstances and risk tolerance before making any investment decisions.

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