Investment Portfolio

An effective way to build passive income is to own shares in companies which pay dividends. There are at least two ways to do this. You can do it directly, or you can do it indirectly.

First you might consider directly owning shares in the “Dividend Aristocrats” which is a list of blue chip companies in the S&P 500 index that have demonstrated steady growth in dividend payouts over the years. Typically companies which are past their high growth stage tend to pay dividends.  Utilities, manufacturing, telecoms, and financial sectors tend to make up the majority of dividend paying companies. Tech, Internet and biotech, on the other hand, usually do not pay any dividends because the management of these companies often prefers investing their cash into growing their businesses.

Finally, an easy way to get exposure to dividend stocks is to own the stocks indirectly.  You can do this when you own exchange traded funds (ETFs) like Vanguard’s High Dividend Yield ETF (VYM) or index funds such as the Vanguard High Dividend Yield Index Fund (VHDYX).

Develop a Product & Outsource the Work

Entrepreneurs do this all the time. They come up with a product that solves a problem. Then they outsource the work to manufactures that ultimately create their products. If you know you have a product that would be in high demand, create it! Outsource the development of the product to a manufacturer. Then, outsource the packaging, marketing, etc. Sure you will need upfront capital to make money this way. However, you can fund your project by using a crowd funding website such as KickStarter. Tell the world how your product will help them, and people all over the world can help you achieve your goal by investing in your product. This passive income idea does require a lot of time and money initially, but as the time progresses, the amount of time you spend working to build your product will lessen.

Buy & Sell Domain Names

This passive income idea is often neglected. If done correctly, you could make quite a bit of money! Making money with this idea involves buying domain names that you believe people would want for their company due to its keywords and potential web traffic. Once you have a domain name, get it out to the public so that the public knows it’s for sales. This method of passive income has made many individuals millions of dollars. Who says this can’t happen to you too?

Mike Mann is an individual who had great success with buying and selling domain names. Mann decided that he would buy over 16,000 domain names within a few days. If anyone wanted the names that he’d purchased, they would have to buy it from him. In 1998, Mann received an offer for Menus.com. The first offer he received was $25,000. The following day he got a $50,000 offer for the domain, a domain name that he only paid $70 for.

Keep in mind that some of these passive income opportunities will require some time and, in some cases, money. Rental properties, for instance, will take some money (to purchase the property). It may also take some time if your property needs some fixing up prior to tenants moving in (or after they’ve moved in). Although you will have to put in an initial investment, passive income does not require continuous effort but it will provide continuous cash flow.

Have you tried any of these passive income ideas?

Photo: Flickr: Tax Credits

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