SINGAPORE: In the quest for financial freedom, many turn to passive income investing to sit back and watch their money grow.
Unlike the unpredictability of growth investing, the focus here is on generating income from value investments. If you want to start earning passively, here are 10 ways to start passive income investing in Singapore, each offering a distinct avenue for consistent returns, according to Dollars and Sense.
1. CPF Life
The Central Provident Fund Life (CPF Life) might not immediately come to mind when thinking about passive income, but it’s an investment every Singaporean holds. With government-backed assurance, CPF Life provides a monthly payout after age 65, offering a stable income source for a lifetime.
2. Singapore Savings Bonds (SSBs)
Issued monthly by the Singapore government, SSBs offer a low-risk investment with guaranteed capital and a flexible withdrawal option. The December 2023 issuance boasts an interest rate of 3.4% p.a. for those holding it for the full 10-year period, making it an attractive “risk-free” investment.
3. Retirement Plans or Annuities
Retirement plans or annuities recommended by insurers provide a mix of guaranteed and non-guaranteed returns. Offering flexibility, these products cater to individual needs, but investors must be cautious of early termination penalties.
4. Bonds
With their guaranteed principal and regular payouts, bonds are attractive to passive income investors. However, investors should be mindful of the bond issuer’s debt repayment ability.
5. Fixed Income Exchange-Traded Funds (ETFs)
Fixed-income ETFs offer a diversified basket of fixed-income assets, typically bonds. Investors can choose ETFs based on market or sector preference, providing an avenue for stable returns.
6. Real Estate/Rental Income
Owning and renting out a property can be a lucrative source of income, but it demands effort in finding reliable tenants and managing administrative tasks.
7. Real Estate Investment Trusts (REITs)
REITs, essentially property investments, allow investors to access diverse property portfolios. With a mandate to distribute 90% of earnings, REITs often provide attractive distribution yields.
8. Mutual Funds or Unit Trusts
Mutual funds pool money to buy various securities, offering income-focused options. However, investors should be cautious of high fees that may impact returns over time.
9. Robo-Advisors
Robo-advisors use automated solutions to invest funds, with some platforms focusing on income generation. Notable options include StashAway’s Income Portfolio and Endowus Income Portfolios.
10. Dividend Stocks
Dividend stocks offer variable passive income, dependent on company performance. While blue-chip stocks are known for their consistent yields, investors should scrutinize company fundamentals for sustainability.
There are many ways to start passive income investing, each with its own risks and rewards. Investors should align their choices with their financial goals, risk tolerance, and clear understanding of each investment avenue. As with any financial decision, due diligence and careful consideration are most important. /TISG
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