Best Income Producing Assets

green plant in clear glass

A topic that comes up often though worded in different ways is how to acquire wealth. The best way to build wealth is that any money you bring in should go to part savings on hand up to your desired comfort level and the rest should be put towards assets that generate income and less should go to depreciating assets. Why should you go to work when you can put your money to work instead?

The easiest way to get to where you have a comfortable living amount and be more financially independent is to figure out a range of income-producing assets so your stash of savings keeps multiplying.

The thing about acquiring income-producing assets is while they are a great strategy to put to use they each have advantages and disadvantages so it takes some knowing what you would be comfortable and okay with.

This article will be an exploration of what is out there as options to see about making more money.

Online Business

The best way to start investing is by establishing your own online business. The problem is these take a lot of work initially to build and in many cases you will have to keep educating yourself on how it all works. You have to build an audience which takes a while and you have to seem like a credible online space before all the advertising partners and affiliate partners will find you attractive to work with.

The nice thing is that once built your online business will be a great asset that produces income. Bloggers are the space I know the most about and I’ve seen where that can end up after a few years.

Though there are many types of online businesses like e-commerce websites, Youtube channels, and again different types of blogs that are either affiliate sites or authority sites. Many of these things can be purchased already making some level of earnings, though if you don’t know how to manage them the future earnings will eventually slip.

I chose to go with a blog clearly. The setup process is actually rather simple and I got lucky in my blogging journey as I got adopted by a group of serious bloggers who were already earning all of their money online through various means.


What are the advantages of an online business?


The nice thing about blogging is the actual operating costs are low, like in my case $5 a year sort of low for hosting via HostKoala, and around $8-$11 a year for custom domain via Namecheap. This allows for a cheap start and when budget allows the site can always be transferred elsewhere if need be, like Cloudways.

If your budget allows for more than you can compare and contrast all the hosts that are out there for starting. For myself, I like to start on HostKoala then later move to Cloudways once site proves workable. This means for $18 a year I can experiment with my site.

Otherwise, I do not require an office, warehouse, inventory, nor transportation for any online business type. If you are selling something then you can do direct delivery on products and offer business hours around what works for your schedule. You can operate from any location you desire and can either do your own customer support or find a way to outsource to a freelancer or a virtual assistant. You basically need a laptop and internet and you are good.

Usual online businesses:

Make your own blog or buy some blogs- The gist of running a blog is you write useful stuff people want to read or you hire people to write you articles that people want to read and you collect it all on a site. The first year is mostly you focusing on growing the site and then you start to work in your monetization strategies if you plan to put up ads or lease ad space or add in affiliates, or some opt to make their own products such as eBooks or a variety of useful downloadable content.


The above picture is just showcasing the type of earnings with a one month blog with roughly 30 posts after 1 day of the ads being up. Worst case it is nothing and at best about a cent a day. The issue here is that traffic takes a while to build and no traffic means little money.

Blogs are a marathon at times and Adsense is honestly one of the lowest of the low in terms of ad income. Some people opt to skip Adsense and wait until they can get into Ezoic, then opt for something like Mediavine, and some go with other options.

Affiliate Marketing- This is when you get paid a commission when someone signs up for something using your referral link, it is either some type of service or some form of product they order. It often isn’t as simple as slapping a link somewhere and I suggest either getting a course or digesting the free info that can be found out there.

Sell Stuff- Some people opt to open an online store to sell things since it is obviously cheaper than operating a brick-and-mortar type business and maintaining a physical location. Online stores have wider audience reach and some people don’t bother with physical products at all and sell all digital goods like Canva templates or teaching materials.

Videos- Lot of people are waking up to the world of video monetization primarily on Youtube. In terms of video content, you can do tutorials, product reviews, entertainment, or whatever you want that is advertiser and subscriber friendly.

Stocks

Stocks are when you invest in to a company and then own a small share of ownership in that company. These small bits of a company are broken up into shares and stocks are sold on stock exchanges and you primarily use a brokerage to trade, sell, and hold your shares.

Stocks seem to scare most people at first because often people aren’t taught how to view things because with all things what you buy will come down to what your goals are. Stocks offer advantages when compared to other investments.

Why invest in stocks?

The main obvious thing is they have high return potential. Although the word there is “potential” as markets do really dumb things and people do really weird things so in terms of individual stocks it is hard to guess how they will do year to year. The stock market as a whole shows an upward long-run trend and being invested in stocks has historically been the highest return income-generating asset. Though in current times this might be debatable when compared to some other assets and is also dependent on how you build your portfolio.

One big pro, as well as con of the stock market, is that everyday investors are buying and selling shares. This means when you are tempted to sell your stocks they are pretty easy to sell as you will quickly have a buying. Other assets take more time to sell like if you are selling off a web property, real estate, or raw land you have to wait until you find a buyer.

I say this is a con because the ease of being able to shuffle around stocks may tempt you into trading TOO much which may or may not affect your long gains when compared to just leaving things alone. It gets further complicated when you start to figure out how your taxes will look as trades done when you sell will be affected by a multitude of factors.

Now in terms of ease, if I was starting an account over from scratch and had no idea what I was doing, I’d probably open a SoFi account and either pick out some Vanguard ETF (things like VTI, VOO, VEA) or invest small amounts into some of their stock bit picks or I’d try their account type that automatically invests.

Using a service like Acorns or Betterment means there will be some fee drag which over many years means extreme losses, though it isn’t so bad in the short term. Even Wealthfront or something like Ellevest has fees. Robo Advisors aren’t a bad place to start, just not usually something you want to do forever.

The nice part about SoFi is you can start even with small amounts. Even if you just want to start by investing $5 a week you can do that.

Only invest money you don’t think will be critical to your survival after you have your various emergency funds established.

person using MacBook Pro

Bonds

Bonds are another popular income-generating asset and there are a few different types of bonds. Typically as people age, they shift more of their holdings from stocks to get more stable assets like bonds.

Savings Bonds

Savings bonds are debt securities that are issued by the US Department of the Treasury and they help pay for the US Government’s borrowing activities. These are considered the safest way to save as they are backed by the US Government. They can be acquired as either EE or I savings bonds.

The nice thing about these bonds is you keep getting guaranteed money and if you go with the EE savings bonds the amount doubles by the time it reaches maturity. They are exempt from federal income taxes and local taxes and are very stable to rest on when your goal is more keeping the value of your money safe.

Their other nice perk is they spread out your risk as they are considered no-risk investments and the minimum investment amount is $25.

Government Bonds

A government bond is another investment where money is loaned to the government and they pay back the money at an interest rate. The government uses these bonds when they want to spearhead new projects. You give them money and they pay you back plus some. They give back a steady return, are considered low risk and often perform nicely.

Corporate Bonds

Corporate bonds are when a company sells a debt security to an investor. The yields are often pretty nice with corporate bonds and with that comes higher risk. They are nice as well as they aren’t vulnerable to interest rate increases or inflation as much since they have a short time to redemption, they help diversify portfolios, and they aren’t considered as risky as a lot of the other asset classes.

Real Estate

In recent years there has been a major interest in investing and setting up rental properties. Rental income is considered a steady way to make income over a long period of time at least when times are good. The idea is you buy an investment property and rent it out to tenants.

People usually do this by buying a property and borrow the remaining amount as a mortgage after the downpayment and rates are set. Some people start off with this being their main house where they live in a room and rent the other rooms. Some people opt to convert their space into an AirBnB location.

Doing the landlord thing has some pros and some cons. You will be in charge of the property and can pick your tenants as well as how much to charge in rent. Other people pass over the work to a property management company to offload some of the work. If you scoop up a house where the mortgage is around $500 and you can rent the property for $1,000, then you have a $500 monthly income. The income is all based on space available and paying tenants.

Peer to Peer Lending

Peer to peer is when you lend financial assets to someone or some business entity. There is no middle person and the lendee is supposed to pay you interest on the loan. Most of the time this activity is done over platforms and they offer secured and unsecured loans though most loans are unsecured. Peer to peer lending isn’t without some risk but often with a little due diligence the gains still outweigh the losses.

How do assets make income for you?

When you are holding an asset and it gains value you can resell them, even if they are Pokémon Cards or some limited edition Coca-Cola collectible. Holding properties like real estate or assets like stocks, if they go up then you can sell for a profit.

You might even be holding a business that earns you money daily, weekly, monthly. You can turn all of these things bringing in income into more things that bring in more income. The ability to acquire a passive and semi-passive income is how people get financially free.

Final Thoughts

When picking out your assets you have to figure out what works best for you. There are pros and cons of each asset. The pandemic has turned off some real estate investors for example who weren’t too happy with how things went for them this year.

The main consideration is figuring out risk tolerance as well. When you are younger you can recover from losses and take on more risk. By the time you are in your 60’s your focus should have been shifting to safer things as all these things affect when you retire. People who start young can often soft or full retire very early, all depends on income and how that income is put to work.

An important aspect of financial freedom is always starting as early as possible as these things greatly affect the financial future of a family.

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