Laura Beck
Sep 1, 2024
“First off, any excess cash should be placed in a money market account. Most are yielding around 5% at a time when CPI is now back down towards 2.9%. That yield differential is a no brainer,” said Anthony DeLuca, CFP, an expert contributor at RetireGuide. Just remember that investing comes with risks and everyone’s situation is different, so it’s a good idea to consult a financial advisor when making investment decisions.
A recent article from GOBankingRates explores seven top passive income investments that could help individuals build wealth in 2024. Financial professionals, including Anthony DeLuca, provide insights on how to get started without needing a side hustle.
Dividend-Paying Stocks: Erika Kullberg, a personal finance expert, believes dividend-paying stocks are a great choice if you can make a significant upfront investment. They offer consistent income and potential for capital appreciation. Dutch Mendenhall also noted the long-term capital gains potential.
Real Estate Investment Trusts (REITs): Mendenhall described real estate, particularly REITs, as a top choice for generating passive income. Kullberg added that REITs provide exposure to real estate markets without managing properties and offer dividends.
Index Funds and ETFs: Mary Tung suggested Vanguard Total Stock Market and Vanguard Total Bond Market Funds as ideal options due to their low expense ratios and diversification. ETFs behave like stocks and offer similar low-cost and diversified benefits.
High-Yield Savings Accounts and Certificates of Deposit (CDs): DeLuca recommended placing excess cash in money market accounts, yielding around 5%. He described the yield differential as a “no brainer” compared to CPI inflation at 2.9%. Kullberg echoed that high-yield savings and CDs are great low-risk, long-term passive income options.
Peer-to-Peer Lending: Mendenhall explained that peer-to-peer lending platforms offer low-risk ways to earn interest with minimal effort by lending to individuals or small businesses.
Rental Properties: According to Tung, rental properties can provide reliable income through monthly payments from tenants, though they require some management effort. Long-term capital appreciation can also add value.
Digital Products: Tung suggested self-publishing e-books or creating digital products like templates, which can be sold repeatedly with little ongoing effort. Annie Cole also recommended freelance or gig work in your area of expertise to generate passive income.
Bonus Tip: Diversification
Tom Buckingham emphasized the importance of diversifying across different passive income options, such as rental property, stocks, bonds, CDs, and annuities.
DeLuca provided a final piece of advice, highlighting the importance of anticipating market changes: “As the Fed begins lowering rates, the inverted yield curve will flip over, and long-term bonds will become more in favor.” He advised considering investment laddering to navigate the economic landscape in 2024.
Investors should be aware of the risks involved and consider consulting a financial advisor when making investment decisions.