The ABC’s of Investing for Passive Income Online
Chances are you have heard that there are online investing platforms you can use to invest as little as $500. Even if you haven’t, this article will introduce you to the types of investments you can make from your computer or tablet to generate passive income, starting today.
A: Always Do Your Research
If you are seeking to invest some extra cash online, do your research first. There are myriad opportunities online, and you need to select which types of investments you are interested in, your preferred level of involvement in the assets, and your risk tolerance.
You should then shop around for the platform that offers you the investment opportunity you seek at the lowest cost of trading and management fees because these vary widely. Also, look into the historic returns of the investments you are considering to have an idea of what you are getting into. Any reputable broker or platform will supply this information to you.
Learn to Invest vs. Robo-Advisor
Technology has made this an exciting time. Whether you are entirely new to investing and want to learn how to buy, sell, and trade on the stock market, or you want the experts to do it for you, either opportunity is available.
Traditional brokers such as Fidelity, TD Ameritrade, and Merrill Lynch have created an online presence that provides investor education and allows investors to develop a portfolio of stocks or portions of stocks at a fee. That fee may be variable, such as by trade or portfolio worth, or it may be fixed annually.
Other online platforms such as Robinhood, SoFi, Wealthfront, and Betterment offer a robo advisor to manage investors’ selections. A robo-advisor uses programmed algorithms to select investments according to your preferences, such as market sector, risk, expected returns, and length of the investment. In this way, a new investor or someone who wants to be more hands-off and not pay an expensive brokerage fee can get professional advice and management of their stock portfolio.
B: Buy What You Believe In
You can invest in individual stocks of publicly traded companies that do business you believe in ethically, morally, or otherwise. In other words, you can put your money where your mouth is! This can be done through any online investing platforms that allow you to freely trade or inform your robo-advisor of the types of companies you wish to invest in.
Investing according to ethos is not new. There are even mutual funds and ETFs that target investors interested in supporting companies operating in the ecology, alternative energy, emerging markets, as well as small business owners in underserved communities, and the like. Simply google your interest, such as “ETF alternative energy,” and you will see the options available to you.
You might also consider investing in Peer-to-Peer (P2P) lending online. Again, you have the choice to lend to whomever you wish on these platforms, and you can select to fund individual loans or invest in a portfolio of loans made to individuals or types of businesses that you wish to support.
C: Create Diversification
Individual Stocks – Creating Diversity
Don’t put all of your eggs in one basket! Relying on one stock to generate passive income for you is a poor strategy because every stock has its ups and downs and may be down when you need to sell. Creating a diverse portfolio of investments ensures that you will not lose money just because a single stock on your portfolio is down.
You can create a diverse portfolio in several ways, depending upon your preference for involvement. You can personally select a diverse array of stocks for your portfolio on a single platform, or you can use your robo-advisor to select a portfolio of diverse stocks for you based on your preferences.
Mutual Funds, REITs, and ETFs Create Diversity for You
Suppose you are not interested in creating your own diverse portfolio. In that case, you might invest in a professionally managed fund consisting of a variety of individual investments such as a mutual fund, a Real Estate Investment Fund (REIT), or an Exchange Traded Fund (ETF).
A mutual fund will offer guaranteed returns at a lower rate than most other investments but at a higher rate than a savings account.
A Real Estate Investment Fund (REIT) is how the average individual investor gets into commercial real estate investing. For as little as $500, an investor can purchase shares in a company that invests in a broad array of mortgage lending, mortgage purchasing, retail buildings, office buildings, hospitals and other medical buildings, multi-tenant residential housing, and other real estate estate-related businesses. These returns are typically higher than mutual funds, however, the effects of the pandemic on commercial real property have yet to be played out.
Exchange-Traded Funds (ETFs) hold stocks, bonds, and sometimes commodities, often according to a specific theme. Popular themes include renewable energy, healthcare, information technology, the S&P 500 index fund, dividend-paying stocks, country-based investments, and many others.
As an individual investor, you have myriad options when it comes to investing online. Research the options in this article that appeal to you and discover what lucrative and profitable investments are out there for you.
About the Author
Veronica Baxter is a writer, blogger, and legal assistant operating out of the greater Philadelphia area.