INVESTMENTS THAT PAY OUT:Are you looking for investments that generate a monthly income? You’ve come to the right place. The concept of getting regular financial support every month is attractive. But before you can start receiving a regular passive income, you first need to identify the investments.
Today, I present to you 12 investments that pay out every month, so that you can build up a larger passive income and achieve greater financial independence.
Why invest in passive income?
Before diving into investments that pay out every month, first ask yourself why it makes sense to create sources of passive income. While everyone has their own reasons, here are some of the most common:
If your goal is to retire early, it is essential to have streams of passive income. This is because passive income enables you to cover your living expenses without having to liquidate your assets.
2.More comfortable retirement
To have a more comfortable retirement, extra income can certainly help. Passive income allows you to do the things you want to do in retirement (like travel). Many types of investments can create retirement income – we’ll cover several here.
3.Less dependence on a “day job”
Are you familiar with the proverb “don’t concentrate all your efforts and resources in one area or option”? If you rely solely on your job as your only source of income, then your financial investments are not varied enough.
Instead, create additional sources of income to reduce your dependence on the income from a full-time job. You’ll be in a stronger financial position if something were to happen to your regular income.
4.Greater freedom of movement
Having multiple streams of income provides the chance to prioritize self-care and personal time. If you desire to take a year off to travel, having passive income can make it a feasible option.
Perhaps you just want to reduce your work hours. That becomes an option too when you have alternative sources of income.”
Investments that generate interest income
Once you have identified the reasons why you want to earn passive income, start thinking about investments that will earn you interest every month.
We will discuss investments that pay dividends a little later, but for now, we will focus exclusively on debt instruments.
Although I generally describe these investments as those that earn you income every month, some investments only pay quarterly, for example. Stocks, in particular, usually don’t pay you every month (they pay you every quarter).
However, creating a portfolio composed of different types of investments can generate regular monthly income.
1.High-yield savings accounts
Okay, okay, I understand that high-yield savings accounts are no longer really high-yield. With the rise of inflation, savings accounts no longer have the same impact as before.
However, you still need a savings account. It is one of the safest places to stash your money, especially money that you will need soon.
While it is probably not wise to keep more than your emergency fund in a savings account, you might as well choose a savings account that pays as much as possible, like the one offered by Revolut.
2.Certificates of deposit
If a savings account doesn’t earn you much, the next option to consider is a certificate of deposit. Also known as a CD, these are investments for which a bank pays you interest in exchange for your commitment to leave your money with the bank for a certain period.
For example, if you buy a €5,000 CD for two years with a 1% interest rate, your bank will hold your €5,000 for two years. In exchange, they will pay you 1% per year for the right to use your money.
Unfortunately, CD rates have also declined in recent years. However, if you want to maximize interest on cash saved in a bank, they are a viable alternative to savings accounts because they often pay slightly higher interest.
3.Obligations of the French government
The following investment for a monthly income comes from the French public treasury. There are various categories of bonds provided by the Treasury that you can choose to invest in.
- ✅ Treasury bills – Maturity of one year or less
- ✅ Commercial paper – Maturity of two to ten years
- ✅ Treasury bonds – Maturity of ten to thirty years
Generally, the longer the duration of the bond (the period during which you tie up your money), the higher the interest rate.
For example, if you buy a 20-year Treasury bill, you can expect a higher interest rate than if you buy a one-year Treasury bill. Why? Because you are giving up the use of your money for a longer period.
Although French Treasury bonds are considered “risk-free,” there are other types of government bonds to consider. Municipal bonds are an example of this. Regions, cities, and counties issue municipal bonds to finance their daily obligations and investment projects.
Municipal bonds come in two different forms: general obligation bonds and revenue bonds. General obligation bonds are guaranteed by the issuing entity and not by a specific project.
For example, if you buy a municipal bond from the Paris region, you are relying on the Paris region to repay you the money you loaned them (plus interest). Revenue bonds, on the other hand, are guaranteed by a specific source of revenue, such as toll fees.
When it comes to fixed-income investments, government bonds are generally less risky. However, there are other types of fixed-income investments that yield more in exchange for higher risk.
One instance of this is corporate bonds, which involve lending money to companies and receiving a fixed interest rate in return. The level of risk associated with corporate bonds can vary greatly depending on the company and the duration of the bond, ranging from highly secure to highly precarious.
For example, if you buy a five-year Apple corporate bond, you have a good chance of being repaid with interest in five years.
But what if you had bought a Gemka corporate bond just before the company went bankrupt? There is a good chance that you would have lost your investment.
While corporate bonds are great vehicles for getting higher returns, be cautious as they can carry higher risk.
6.Private notes / Private loans
This next investment that generates monthly income requires a little more work. While most people think of traditional investments such as bonds when it comes to generating income, it’s worth considering alternatives like private loans.
A private loan is a private transaction in which you lend money to someone in exchange for a fixed rate of return. For example, some people lend against real estate receivables.
Tax liens are one example of this. With a tax lien, you pay an unpaid property tax bill and become the lender for that person.
If they don’t pay you back with interest, you can take possession of their home through a foreclosure process. Another similar private lending option is a mortgage note (e.g., selling your home and providing financing to the buyer).
There are also crowdfunding platforms (like Raizers) that allow you to invest in private real estate debt.
Finally, in recent years, peer-to-peer lending has become more popular. These services allow individual investors to buy small portions of larger loans made to individuals for things like credit card debt consolidation, home improvement, etc.
Although these are unsecured loans to riskier borrowers, many investors have earned reasonable returns on these platforms, although past performance does not guarantee future results.
Here’s how it works. Let’s say someone is looking to borrow €10,000 to consolidate credit card debt. Individual investors could buy a €25 slice of that loan (400 investors total). By doing so, you can gain diversification by purchasing a larger quantity of notes.
Investments that pay dividends or distributions
Now that we’ve covered investments that pay interest, let’s look at investments that pay dividends or distributions. Generally, these are equity investments where you buy ownership in some sort of business.
One of the most straightforward ways to earn dividends is by investing in stocks that distribute dividends.Stock dividends are your slice of the pie that companies pay out to their shareholders – people who own stocks like you!
While not all stocks pay dividends, many do. Companies that pay dividends usually do so once per quarter, giving you a regular income source throughout the year.
If you want to avoid the risk of a single stock, one option to consider is a dividend index fund. These funds hold a basket of high-dividend stocks, allowing you to earn dividends while diversifying your risk.
If you don’t possess a brokerage account for purchasing stocks that pay dividends, consider using Bux Zero, which is among the most inventive brokerage choices available.
Preferred stocks are another type of investment that generates regular income. They are a sort of hybrid between common stock and bonds.
With preferred stocks, you own a share of the company, but you receive a fixed dividend from the company. In practice, preferred stocks behave like bonds.
If you’re looking for a fixed income source, it’s worth considering buying preferred stocks.
While they may carry more risk than bonds (because, technically, preferred stocks sit lower in a company’s payment hierarchy), they can also offer a higher return.
10.Real Estate Investment Trusts (REITs)
Real Estate Investment Trusts (REITs) are instruments for buying real estate. REITs regularly pay dividends to investors from the income generated by the real estate they own.
A REIT is similar to an index fund, but for real estate. For example, you can buy a portion of a shopping center, a few apartment buildings, etc. through a REIT.
REITs often offer higher returns than dividend stocks. However, REITs are not very tax-efficient instruments. As they are required to pay out 90% of their taxable income each year, it is not possible to defer capital gains as is the case with stocks.
11.Private Real Estate Investments
Finally, if you are looking to build a investment income, consider investing directly in real estate. There are numerous choices to take into account, which may include:
- Single-family rental properties
- Multifamily rental properties
- Commercial buildings
- Self-storage facilities
- Mobile home parks
I suggest conducting research on the available choices and determining which one appeals to you the most. It’s essential to note that all of these real estate specializations can yield profits, so avoid overanalyzing your decision.
Generating passive income is possible through rental properties.They generate continuous income without you having to kill the goose that lays the golden eggs and sell assets.
This means you don’t have to worry about safe withdrawal rates or the risk of sequence of returns as you approach retirement – at least not for your rental income.
In fact, real estate assets increase your net worth over time, as properties (hopefully) appreciate in value and your tenants’ rent payments pay off your mortgages.
Rents also adjust to inflation, so you don’t have to worry about inflation reducing your income.
Returns are predictable because you know the purchase price of the property and the market rent rate, and you can accurately forecast long-term averages for all expenses.
Landlords can mitigate key risks associated with rental properties through rigorous tenant screening and rent default insurance, as well as good property management practices, including biannual inspections.
And to top it off, real estate offers exceptional tax benefits.
Moreover, no one is saying you have to rent to full-time tenants. You can also rent your property short-term on Airbnb.
Although rental real estate can be a lucrative investment opportunity, it is not suitable for everyone. Making profitable investments in this field requires expertise and understanding, which is why many novice rental investors end up experiencing financial losses.
Rental properties also require several thousand euros in liquidity in the form of a down payment and closing costs, which makes diversification difficult at the beginning.
Real estate is also notoriously illiquid. It takes a lot of money and time to cash out your capital by selling it.
Invest in rental properties only if you really want to learn the ropes and make it a hobby or a business. If you just want to diversify your assets, there are many simpler options to expose yourself to real estate, such as Real Estate Investment Trusts (REITs).
Considerations for investing to generate income
Before concluding, I would like to address some key points to consider when investing for a monthly income. What may be a good investment for me may not be suitable for you. Before deciding where to invest, consider the following:
Risk profile – meaning the level of risk you are willing to accept in exchange for a return on investment.
Liquidity – meaning how soon you will need to recover your money? Do not invest in illiquid or volatile investments such as real estate or stocks if you need short-term access to your capital.
Return objective – meaning, based on your time horizon, what level of return are you seeking? This question interacts with the level of risk you are willing to accept.
Which investment option is the most suitable for generating monthly income? It is the one that meets your personal financial goals (based on your time horizon/return target, risk profile, and liquidity needs). Personal finance is personal.
In case you begin creating investments to generate passive income, it might be useful to monitor your advancement.
Investments that generate monthly income:
Buying investments that generate a monthly income is not difficult. But it takes some time at the outset to determine which investments best meet your needs.
Once you have determined the most suitable investments for you, all you need to do is invest a little money to get started.
Some investments will begin paying dividends/interest immediately, while others may take a bit longer depending on when you purchase them (for example, if they pay quarterly dividends).
While investing larger sums can result in a higher monthly income, there is no harm in starting slowly and increasing the income over time. Even if you do not have a lump sum to invest for a monthly income, investing regularly will help you make progress.
Establishing a collection of investments that generate monthly income requires a significant amount of time. However, the initial stage is to select investment alternatives that align with your objectives. Hence, examining the suggestions mentioned earlier can aid in commencing your investment journey.