The modern age has been characterized by increased automation and robotics, globalization, digitization, and the rapid growth of cryptocurrencies. These trends in alternative investing are in a constant state of revolution, giving investors increasing opportunities to profit.
Passive income is the term used to describe income earned without having to do much work. It is a type of income generated through investment in assets such as bonds, commodities, and real estate.
These assets provide consistent yields on invested capital in the long term. Here we will discuss five alternative investments that can generate passive income from which you can become financially independent.
1) Peer to Peer Lending
P2P lending is a relatively recent development in investing. Online P2P lending platforms provide loans for every purpose, whether for personal or business usage. Once the borrower is deemed eligible, you can fund the loan by joining a group of investors who are willing to lend to others.
Typically, your investment is combined with other investors’ funds to create a loan for the person who is seeking financing. After that, you’ll have a fixed monthly amount that includes the interest the borrower owes you.
The returns you receive from P2P lending are frequently greater than other, more traditional investments. However, the biggest concern with peer-to-peer lending is that you’re giving money to people who usually cannot secure a bank loan or otherwise can’t use conventional loan channels. In turn, it raises their likelihood of defaulting on their loans.
Nevertheless, you have control over the borrower’s credit score and other eligibility criteria, and you have the option of funding or not.
2) Artwork and Collectibles
The art market is currently enjoying a boom. As a result, prices for fine art are rising, and it is projected that they will continue to rise in the future. Fine art includes paintings, sculptures, and other forms of artwork. You may be able to charge a premium later if you purchase a piece of fine art at a lower price. Collectibles such as coins and rare books are other items that will typically continue to appreciate as long as they are in good condition.
Look for a reputable art dealer to help you get started. You can use that dealer as an intermediary between you and the client who wants the art. The dealer will allow you to price your artwork competitively while getting the best commission for himself.
You should also hire a lawyer to draft a contract between you and the dealer/buyer. This contract will spell out all the details regarding the art and any commissions you will be getting.
3) Real Estate
As you probably know, real estate is the most widespread real asset type and the largest asset class worldwide. Moreover, it is a fascinating asset class because it shares traits with bonds and equities, providing immediate cash flow to owners through rent payments and capital appreciation.
The real estate market has been rising in recent years, and it is expected to continue rising. This makes real estate a great investment opportunity. Depending on the market, investors can make money from residential, commercial, or industrial properties. In addition, you can choose to invest in rental properties and collect rents for leasing their properties. Investors can also choose to buy the property to sell it for a higher price later.
You should learn more about tax liens investing as it becomes an increasingly popular investment strategy. With a small upfront investment, you can see excellent rates of return if you have patience and focus on properties in good neighborhoods and school districts. Talk to a professional tax lien investor or take a masterclass to seize this less known but highly lucrative opportunity.
Other potentially profitable real estate investing strategies include house flipping, vacation rentals, and land trading.
4) Private Company Stock
Private company stock is a form of alternative equity investment that you can use to invest in a company’s future growth. You will have to put up your funds to buy shares in the company at an agreed-upon price. The amount you invest will depend on the company’s value and what you have agreed upon with the company’s management.
The upside of investing in private companies is that you can access high-use industries such as technology, biotech, healthcare, and finance. These industries are expected to see the highest growth in the coming years. The downside of this type of investment is that you are not guaranteed success because there is always a risk that the company may fail.
5) Cryptocurrencies
Cryptos are decentralized forms of currency that allow peer-to-peer transactions. No central bank, financial institution, or government controls these transactions, as in centralized forms of currency. Cryptocurrencies also have a finite supply, making them rare and valuable assets. They are now being traded on public exchanges.
Highly volatile and extremely risky, crypto can yield significant profits if you do your research right, understand the challenges, develop flawless exit strategies, and have a high tolerance for risk and loss.
Bottom Line
You should learn more about these investments and research them thoroughly before you spend your money. You can then use your knowledge and skills to earn a good passive income.
To generate a decent amount of passive income, you must understand how these investments work, learn continuously, take classes, connect with veteran investors, join networks, and don’t be afraid to fail sometimes!
