Robert Kiyosaki in his famous book – Rich Dad, Poor Dad said –
“My Rich dad taught me to focus on passive income and spend my time acquiring the assets that provide passive or long term residual income… passive income from capital gains, dividends, residual income from business, rental income from real estate, and royalties.”
He goes on to say –
“The key to financial freedom and great wealth is person’s ability or skill to convert earned income into passive income and/or portfolio income.”
While the importance of having multiple passive income streams can’t be overstated, it is important to first understand what it is.
What is Passive Income?
Wikipedia defines Passive Income as – “income resulting from cash flow received on a regular basis, requiring minimal to no effort by the recipient to maintain it”.
Key phrases which should catch your eye are –
- Regular
- Minimal
Hence any source of Passive income should be regular and it should generate cash flows with minimal effort (notice: it reads minimal and not without). Therefore chance winning in lottery or casino can’t be termed as Passive Income. But yes if those winnings are regular in nature (with skills), then they would surely qualify as passive income.
Regular cash-flows can be earned with minimal efforts only in 2 scenarios –
- You put your capital to work and it earns regular cash flows for you.
- Or you put your skills to work to create an asset and then monetize it. Also that asset once created generates money for you for long period of time without too much maintenance.
There are many passive income ideas in each of the above categories. Let’s have a look at each category in detail –
Passive Income Ideas by Deploying Capital
- Rental Income
- Dividend Stocks
- Deposits
- Dividend Paying Mutual Funds
- Invest in a Start-up
- Domain Investing
- Crypto-Currency
Passive Income Ideas by Deploying Skills
- Start a blog
- Sell Stock Photos
- Sell E-Books
- Become an Online Tutor
- Freelancing Jobs
- Part Time Recruitment
- Affiliate Marketing
- Start a YouTube Channel
- Sell Online
- Online Gaming
- Online Surveys
Now let’s have a look at passive income ideas by deploying capital in detail.
Passive Income Ideas by Deploying Capital
Rental Income
Rental income is perhaps one of the oldest and most widely known method from the pack of passive income ideas.
Since time immemorial, our parents have been investing their capital in real estate and earning a handsome rental yield usually in 2.25% – 4%. There may be outliers though.
Generally rental yields (Actual Rent/ Property Value) are higher for commercial properties as compared to Residential ones. But you need larger capital to buy a commercial property than residential one thereby making the latter the favorite one.
Why does it click? –
- Tangible Asset
- Perceived notion of safety of initial capital
- Stable returns
Another favorite passive income opportunity is investing in dividend paying stocks. Indian stock market has caught
fancy of Indians for decades now. One still remembers the fabulous 90’s where even big scams couldn’t deter the motivation of investors. With India being a developing nation mostly driven by consumption theme and burgeoning middle class with ever increasing disposable income, dividend paying stocks have become a prominent source of passive income. But do note that picking up the right stock is a skill which is best left to experts.
Why does it click?
- Higher returns
Though not efficient (from return perspective) but still a huge crowd-puller, Deposits make for an all time favorite
passive income streams for Indians. The craze for deposits could perhaps be attributed to the fact that initially all the banks were nationalized and hence there was a perceived notion of absolute security of the money. Besides there were not enough financial instruments to deploy the capital to generate passive income.
One earns through the interest on the deposits. And this interest income could be monthly, quarterly or annually depending on one’s likingness. I will write a detailed post later on best interest rate deposits.
Why does it click?
- Safety of the capital
- Liquidity
Just like you would invest in dividend paying stocks, another option is dividend paying mutual funds. The good thing about mutual funds is that they are professionally managed and hence have a higher probability of earning better returns. But be wary of the costs involved. There are several kind of costs involved whenever one is dealing with mutual funds. I will write a detailed post on the framework to select the best mutual fund in each category.
Why does it click?
- Higher returns plus professionally managed
Though technically this would not create passive income (as there wouldn’t be regular cash-flows in most cases) but
it would create wealth and is a great option if you are not looking for passive income to run your house. Depending on how much capital and risk appetite you have, you could become an investor in early stage, growing stage or mature stage of a start-up. But be cautioned: Only a very small % of start-ups succeed therefore spread your capital.
Why does it click?
- Even though it is risky (by probability of number of start-ups succeeding) but the return realization from the successful ones will far compensate the losses.
You might ask – What’s in a domain?
Ask that to Housing.com which purchased .com domain and a fancy number for a whopping $1 Million.
Welcome to the world of Domains!
Again this is not a true passive income idea (if cash-flows is imperative) but generates lot of wealth. The key here is to be aware about the surroundings and upcoming trends. But do keep in mind that probability of hitting a jackpot is low.
Why does it click?
- Doesn’t require too much capital
Crypto-Currency is a digital currency where encryption techniques are used to control the creation and secure
transactions. Read more about them here.
Though there are more than 600 crypto-currency but Bitcoin is the most widely known. In-fact its performance against USD has left many financial experts dumbfounded. Here is a little graph which shows the craziness.
Crazy, right? So 1 bitcoin has gone from practically ZERO to more than $1200 worth in 5 years. Though sceptics are out there in the market but recently Japan legalized its use. A word of caution though – It is highly dependent on countries legal framework therefore systemic risks are very high.
Why does it click?
- Potential to give unheard returns
Now let’s have a look at passive income ideas by deploying skills in detail.
Passive Income Ideas by Deploying Skills
Start a Blog
How much do you make in your job? Rs. 10 Lacs? 25 Lacs? 50 Lacs?
Amit Agarwal makes few crores per year from his blog. And he is not alone in this — Making it Big with Blog World. Read this to know how much Indian top bloggers make per year. Crazy isn’t it?
You too can earn big from starting your own blog. All you need is a niche and discipline to persist for at-least an year. Do remember one gospel truth though. There are no shortcuts to making it big. Your earnings will start to build over period of time therefore don’t lose heart and persist with writing. I will start a separate section altogether on how to start your own blog and build traffic on it for FREE. Stay tuned till then. 😛
There are various methods to monetize a blog. Affiliate Marketing, Advertising, Sponsorship, lead generation are some of the prominent ones.
Why does it click?
- Practically no capital required. All what is required is your knowledge and persistence.
- Upside is limited only by your hard work and imagination. Globally top bloggers make north of $150,000 per month.
Do you like taking photos? Do your friends applaud you frequently on your photos?
If answer to above questions is YES, then you might consider selling these photos online for Royalty.
There are many online marketplaces where photographers upload their photos for others to use for a fee which gets split between the photographer and the platform. The trick is to stick to one niche and then build your brand in that niche.
Why does it click?
- Best possible way to combine your passion with money
Remember “50 shades of Grey” – dubbed by many as Mommy Porn?
Let critics call out whatever names they want, the truth is that it spread like wildfire. And guess what! How did it all start?
It all started when the author E.L.James decided to self publish it as an ebook. Though it is easy to discard James success story as an anomaly, there are many such examples. Here is an article outlining 10 such success stories.
Though it is seen that fiction sells far more than non-fiction but it is advisable to stick to your strength. Once eBook is completed, it could be put up for sale on platforms like Amazon Kindle Direct Publishing and Nook Press.
Why does it click?
- Upside is limited only by your creativity.
- Self Publishing has found many takers in recent times thereby deepening the market
Someone said – “It’s the teacher that makes the difference, not the classroom”
Teaching is perhaps one of the most noble professions. And with the advent of technology, problem of accessibility is also diminishing gradually and it is here where another passive income opportunity arise – Online Tutoring.
There are many companies which allow you to become an online tutor, devote couple of hours a day and earn handsomely. Vedantu and Transtutors are couple of them. All one needs is good hold of a subject.
Why does it click?
- Satisfaction of actually making a difference in someone’s life
Many have adopted freelancing as the new way to work and earn. They just don’t want to be tied up with a single
office and wants flexibility to work from anywhere. You too can take up Freelancing in your spare time and earn decent money. According to Investopedia here are top 10 freelancing jobs that pay. Famous platforms to get started are –
- Upwork
- Elance
- Freelancer
- PeoplePerHour
All you need is a skill which is valued by people.
Why does it click?
- Extremely easy to start
- Potential to earn is limited by your hard work and skill set.
These days it is common to find recruitment agencies engaging Freelancers to fill a position. It is a win-win situation for both. Agency doesn’t have to carry the burden of a full time employee and freelancer gets the flexibility to work with different clients simultaneously. And according to this, Part time Recruitment is among the highest paid jobs when it comes to remuneration per hour. I personally know many people who have made some good money with part time recruitment.
All you need to do is to tie-up with a recruitment agency but do take care of payments. It is not uncommon to hear stories of agencies not paying freelancers or paying with too much delay.
Why does it click?
- Absolutely no setup required
The Big Daddy of all Passive Income Ideas. Mother of all Passive Income Opportunities. The Affiliate Marketing
So let’s begin with this image –
Out of total earning of $34,390, $31,635 came from Affiliate Marketing. And this is not annual but monthly. To read the entire earning report of Harsh, click here
So what is affiliate marketing?
Simply put Affiliate Marketing is you (the affiliate) earning commission from business if you refer a person to business and he/she buys the product. Simple Isn’t it! In old world, these were called dealmakers or agents. Bring 2 parties together and if business happens then earn from commission.
Why is it a craze?
Because there is no limit; absolutely no limit. And above numbers are a testimony to that. I also intend to earn from affiliate marketing only to achieve my goal of becoming financial independent and retire by 45. Read about me here. There will be a whole new different section on how to earn from affiliate marketing. So do subscriber here if you want to learn to tricks.
Why does it click?
- Do I need to say more? 🙂
If Passive Income Ideas were a family, then Affiliate Marketing would be dad and Earning from YouTube Channel
would be the star child who is eagerly looking to fill up dad’s shoes.
I am sure everyone of us would have seen and laughed at either AIB, TVF, BB ki Vines or CarryMinati. And I am sure when it comes to gadgets, we would have surely seen either GeekyRanjit or Technical Guruji. Do you know how much do they make every month?
If I say Geeky Ranjit makes anywhere between Rs. 1 Lac – Rs. 16 Lacs per month, what would you say?
Or BB ki Vines earns Rs. 4 Lacs to Rs. 70 Lacs per month! Don’t believe me? Yes it is unbelievable. But this is not what I am saying but Scoopwhoop.
Now you understand why I said for “Earning from YouTube” as being the star child of Passive Income Ideas family.
So how do you start? That’s the next question you would be having and what all do you need? Well my friend, all you need is a good camera phone (BB started with recording from his phone) and good content. By good content I mean anything which is unique even if it means total crap but unique crap (have you seen CarryMinati?) I will write a detailed post later on how to start a YouTube channel and earn from it.
Why does it click?
- Besides huge earning potential, opportunity to earn fame as well. Best example of Bhuvan Bam who has now gone into acting also.
Are you a craftsman? A designer? Or Anyone who produces a tangible product? If yes then why don’t you sell online
and grow your audience?
Selling Online is one of those passive income ideas which has caught fancy of people with E-commerce booming. Rahul Jain is one of them. Read about his success story here.
Like Rahul, there are many who are converting their art and passion to profitable businesses by selling online. In India, Flipkart and Amazon are the big names which allow you to sell on their platforms for a commission. Worldwide, perhaps EBay is the biggest example. For creative products, Etsy is the destination.
But before you make online selling as Your Passive Income Idea , do make it a point to go through the platform policies especially refund, commission and payment cycle. There have numerous cases when payment got stuck for one particular E-commerce Platform (not mentioned above in examples).
If you don’t want to sell on other platforms and want to create your own, then Shopify is your go-to destination. It allows you to set up your online store in no time.
If you want to learn step by step process on how to sell online, then see this Beginners Guide to Selling Products Online on Udemy.
Why does it click?
- Besides the money, the happiness of seeing so many people using your product is beyond words.
So what did you use to play in College?
Teen Patti? Poker? Or
GTA? CS? NFS? Call of Duty? FIFA?
My personal favorite is Teen Patti but whatever be your favorite, there is an opportunity to show your gaming skills online and earn from it. Famous online destination are –
There are couple of my friends who play poker regularly (once a week) and are earning quite a decent passive income to the tune of Rs. 50,000/month.
Yes until and unless you are skilled, there is an equal probability of you losing. But then we are talking about passive income ideas by deploying skills, remember?
Why does it click?
- What better way of earning money when you can earn while playing your favorite game?
I am not a big fan of this passive income idea and actually cursed myself to include it in the list. But since Online Surveys are one of the legitimate ways to generate passive income, they have been included in the list.
The reason I don’t like it is because it consumes time and doesn’t add any value to you. Besides more often than not, the companies running these online surveys are also not well intentioned to do real consumer research and generate insights.Having said that, here is a list of some of them.
Why does it click?
- Doesn’t really click!
There are many other passive income ideas which I have not included in the list. For example –
- Start a podcast
- Create an online educational course
- Build an app
- Become a freelance writer
The reason for their exclusion is that they will fall under the broad categories outlined above or would be a mix of categories. For example becoming a freelance writer would fall under taking up Freelance Jobs. I want the list to be actionable rather than un-necessary long. But if you want me to do a small write-up on either one of them or want me to include any other passive income idea, do mention in the comments section.
One Last bit on generating passive income. Remember the Gospel Truth?
Passive Income accumulates over a period of time and works like a drip. Don’t get saddened by the slow flow of passive income during initial years. Keep on working and you will see your bucket filling up real fast as the time goes by.
Disclaimer: I have myself earned through these passive income ideas –
- Sell Online
- I sold affordable silver jewellery through E-Commerce platforms some 4 years ago.
- Was making Rs. 25,000 – Rs. 30,000/month but shut it down as had some other priorities in life at that point in time
- From Blog
- Way back in 2007 when I was doing my MBA, I started a blog on Internet Marketing. It generated decent traffic and did earn some small amount from Adsense.
- But gradually MBA took all the time and I couldn’t pursue it further.
- From Freelancing
- Have taken up many small jobs like SEO, FB apps, Content Writer etc.
- Becoming Online Tutor
- Worked with Transtutors as an online tutor for sometime.
- Their Royalty program is good.
- Online Surveys
- Tried it for the heck of it. Never enjoyed it though
- Affiliate Marketing
- I have not earned anything from this passive income idea yet but now with this blog I intend to put it to use.