{"id":12028,"date":"2020-10-16T07:31:24","date_gmt":"2020-10-16T07:31:24","guid":{"rendered":"\/blog\/?p=12028"},"modified":"2020-10-16T07:32:07","modified_gmt":"2020-10-16T07:32:07","slug":"best-investment-ideas-to-generate-passive-income","status":"publish","type":"post","link":"https:\/\/tata-blog.osian.dev\/blog\/wealth-services\/best-investment-ideas-to-generate-passive-income\/","title":{"rendered":"Best Investment Ideas to generate Passive Income"},"content":{"rendered":"\n

An income from assets which do not require your active\ninvolvement falls under the category of passive income. Here your money works\nfor you.  Passive income has always been\nan attractive notion and the economic downturn following the Covid-19 outbreak\nhas only highlighted its importance.  <\/p>\n\n\n\n

In technical terms, passive income can be defined as net rental\nincome or income from your business interests where the taxpayers are not\nmaterially involved. In essence, an income which does not include salaries,\nportfolio, or investment income can be classified as passive income.<\/p>\n\n\n\n

Let us explore ways to generate a passive income.<\/p>\n\n\n\n

Real Estate<\/strong><\/h2>\n\n\n\n

Income from real state may fall under semi-passive income as\ninvestment in real estate is very much an active venture. But once you own a\nproperty — usually at 20% down payment — and decide to rent it out, it is\nmostly about maintaining the property. <\/p>\n\n\n\n

You can also opt for a professional property manager, who usually\nchanges 10 percent of the monthly income. Spotting the right investment,\nhowever, is the key because not all properties may give a healthy return.<\/p>\n\n\n\n

Another benefit of investing in real estate is the loan pay down.\nIf you have obtained a loan to buy the property, your tenants are paying part\nof the loan and once your loan is paid off the income from your property\nincreases multi-fold.<\/p>\n\n\n\n

Additional Read:<\/strong> How Can You Protect Your Wealth\nin the Midst of an Economic Downturn?<\/a><\/p>\n\n\n\n

Real estate investment trusts (REITs)<\/strong><\/h2>\n\n\n\n

A more passive method of investment in real estate is investing\nin REITs.  A real estate investment trust\ncan be understood as a mutual fund holding several real estate projects. The\nfund is managed by professionals and it does not require your active involvement.\n<\/p>\n\n\n\n

This is often recommended since they pay higher dividends than\nother instruments such as stocks or bonds. Besides, it is more liquid than\nowning a property as you can sell your interest in real estate whenever you\nwant. It is also considered a natural hedge against inflation as returns have\nbeen seen to consistently outpace Consumer Price Inflation.<\/p>\n\n\n\n

REITs, however, are relatively new in India. Market regulator SEBI\nintroduced REITs in 2007, but regulation was only approved in 2014. There are\nmainly two types of REITs \u2013 equity and mortgage. <\/p>\n\n\n\n

Index funds<\/strong><\/h2>\n\n\n\n

A passive way to invest in the stock market is putting your money\nin an index fund.  For instance, if you\ninvest in an index fund based on Nifty50, you will be invested in the general\nmarket without being actively involved in the everyday move. Besides, you can\ninvest in an index fund on a sectoral basis. For instance there are options\nsuch as gold, banking, and international markets.<\/p>\n\n\n\n

The concrete proof of why investors over the years have leaned\ntowards index funds is the multi-fold jump in the value of Sensex and Nifty in\nthe past couple of decades. Despite the markets losing momentum during huge\nsetbacks such the 2008 financial crisis of the massive slide in March-April\nthis year owing to the Covid-19 outbreak, the trust in the security market has\nonly grown and so has the index value. <\/p>\n\n\n\n

Dividend yield stocks<\/strong><\/h2>\n\n\n\n

Stocks that have a healthy dividend paying history are called\ndividend yield stocks. Such companies have a proven track record and a steady\ncash flow. Investing in dividend stocks, therefore can fetch you income on a\nregular basis, irrespective of the market cycle. <\/p>\n\n\n\n

\"Best<\/figure>\n\n\n\n

Spotting a good dividend yield stock could be a challenge. The\ndividend yield can vary from company to company and could vary from one year to\nanother.  Long term investors and market\nexperts usually suggest companies that have a 25 year consistent record of\npaying dividend to its investors. <\/p>\n\n\n\n

You may also require expert advice from someone who would also\nknow about the liquidity position of the company, debt status and other key\nfactors.<\/p>\n\n\n\n

Additional Read:<\/strong> How to Start Investing in\ndifferent Asset classes based on their risk<\/a>?<\/p>\n\n\n\n

Conclusion<\/strong><\/h3>\n\n\n\n

The pandemic may well be a wakeup call to better manage your finances. Along with building a well-diversified portfolio, having a passive income source could prove to be useful in the future as it can greatly simplify an investor’s life. <\/p>\n\n\n\n

With Tata Capital\u2019s Wealth Management solutions, you receive the best portfolio guidance for the ongoing economic uncertainty. For those looking for expert advice to organize their finances during the ongoing pandemic, Tata Capital\u2019s Wealth Management solutions<\/a> can help with SIP mutual fund investments and other wealth creation products so as to maximize your earnings. <\/p>\n","protected":false},"excerpt":{"rendered":"

An income from assets which do not require your active involvement falls under the category of passive income. <\/p>\n

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