PASSIVE INCOME IDEAS (FINANCIAL FREEDOM)

Wouldn’t it be amazing if you were out travelling the world and you checked your bank and money just flowed in consistently, kaching-kaching? Or while you are busy taking care of young kids as a stay home parent? If this is your dream, you have stumbled upon the right post at the right time. Passive income is the key to building financial freedom and while it might take some initial work or investment, passive income streams can help you achieve financial freedom over time. Before I begin, none of these are financial advice and I myself participate in a few but not all the pointers listed. That said, here are some popular and effective ways to start earning passive income!

1. Dividend Stocks/Funds/Portfolios

Dividend investing is a strategy where you invest in companies that pay regular dividends to their shareholders. A dividend is a portion of a company's profits distributed to investors. By holding shares in these companies, you earn consistent income over time in addition to any potential growth in the stock’s value. It's a way to generate passive income while benefiting from the long-term growth of the market. Where to find these? You can choose to self-invest stocks that offer dividend payouts or purchase policies / direct mutual funds that offer dividends too. Where is the passive-ness in this? Well for starters you just own the stock or buy into a fund and that isn’t hard work at all. Secondly, the passive part in theory begins when your inflow from the dividends outweigh your outflow towards payments to purchase the stock or fund regularly! Using an estimate of 8% dividend payout per year, that would be 12.5 years to break even a lump sum of 100% input (say 300K at 8%, that’s $2,400/Y which is $2,000/m) - to breakeven this amount and then continue to receive for life, not bad right? Considering the low amounts of initial effort I seriously think buay pai.

Think DBS stocks, think Coca-Cola stock, think Allianz Income & Growth Fund, think PruLink US Dividend Wealth Fund (I can provide offline, connect with me if keen)

Pros: Relatively easy to set up (self or financial agent)

Cons: Non-guaranteed percent of dividends payable

Realistic or not: Realistic

Thoughts: Great for age 21-55, earning a regular income from career and don’t mind setting aside money to create a pot for long term!

2. Rental Properties

Owning real estate and renting it out can generate steady monthly income. While being a landlord requires some initial work—finding tenants, maintaining the property, and handling repairs—it can be a lucrative long-term investment. If managing properties seems daunting, you can hire a property management company to handle the day-to-day tasks, making it a more passive endeavor. In the context of SG, 2nd properties come with additional buyer stamp duties ABSD and that can be a cost factor that puts investors in the red (negative) before even starting the passive income journey. Not forgetting renovation cost? Wear and tear? Periods of no renters? Physical factors such as pandemic lockdown? While I am all for private property for the look good, look successful life, a 2nd property as a proper investment vehicle just doesn’t fit my taste. But hey! If it suits your taste by all means go for it!

Pros: Tangible asset, look good on you

Cons: Large downpayment + ABSD, illiquid asset

Realistic: Not realistic, lower than expected ROI for investment purposes

Thoughts: For show and to haolian that you made it in life, yes sure why not. But crunching the numbers and ROI, I don’t quite see the advantage from an investment standpoint

3. Real Estate Investment Trusts (REITs)

If owning physical property isn’t for you, investing in REITs might be a simpler option. REITs are companies that own, operate, or finance real estate projects, and they are required by law to distribute most of their profits as dividends to shareholders. This allows you to earn passive income from real estate without the responsibilities of property ownership. Same idea as dividend investing but focused on the property sector and you are buying into a “paper-property”

(From ChatGPT):

“In Singapore, Real Estate Investment Trusts (REITs) are required to distribute at least 90% of their taxable income to qualify for tax transparency. As of 2024, dividend payout rates vary across different REIT sectors. For instance, retail and commercial REITs like Frasers Centrepoint Trust offer around 5.7%, while Suntec REIT yields about 6.6%. In the industrial REIT sector, Mapletree Industrial Trust provides a yield of around 7.0%, while CapitaLand Ascendas REIT has a yield of 5.9%.

Some of the highest yields can be found in more niche sectors, such as EC World REIT at 12.3% and United Hampshire US REIT at 12.1%, showing that high yields can often be associated with more specialized or international assets. These yields fluctuate based on market conditions and individual REIT performance, but in general, Singapore REITs tend to offer attractive dividend payouts relative to other asset classes.”

Pros: Hassle Free

Cons: Narrowly focused on only the property sector performance

Realistic: Dividend rates can vary but good in general

Thoughts: Better than physical properly for the sake of investments and passive income purposes

4. Algo-Trading Bots with successful win rates

Now this is where the magic is at. We are in the era of AI and automation, so the natural progression is to tap on the efficiency of algorithms to give you that sniper entry within seconds of your strategy and to do it consistently for you without emotions. Am I doing it for myself? Yes. All self created? Yes. All heavily backtested? Yes. What’s the results, Jay? Well different strategies have different results and it varies from 40% strike with high profit factor to 75% strike with a lower but still decent profit factor. Can this be applied to beginners as well? Yes, but with caution.

Pros: Full liquidity, withdraw to bank anytime

Cons: Very high risk, risk of losing money

Realistic: Yes realistic if there is a pro guiding you

Thoughts: So far the highest potential ROI out of the list because of scalability. 1% of $1,000 is $10 but 1% of $100,000 is $1,000 per win, fully automated.

5. Create Digital Products

If you have a skill or expertise, consider creating a digital product such as an eBook, online course, or design templates. Once created, these products can be sold repeatedly with minimal effort on your part. Platforms like Amazon Kindle, Udemy, and Etsy allow you to reach a broad audience and earn passive income from each sale. Ah! This one! In the age of social media attention is money and yes this is definitely one of the good ways to create passive income. But digital goods usually have to mean you got to have skills in a certain area if not it would be easily replaceable.

Teaser** I am currently designing a website to promote my self-coded, stress-tested investment and trading strategies for sale, keep a lookout! 😊😊

Pros: Hassle Free once set up

Cons: Competitive, need to offer something in demand

Realistic: Yes, only if you already have a skills set and large following

Thoughts: Go for it if you think you have the niche!

Summary:

Building passive income streams takes time and dedication upfront, but the rewards can be substantial. By diversifying your sources of passive income, you create multiple streams of revenue that can work for you in the background. Whether it’s investing, creating content, or leveraging your skills, there’s no shortage of opportunities to start earning while you sleep.

Which passive income stream do you like the most? #passiveincome #financialfreedom #investment #wealthbuilding