Have you ever wondered what it takes to grow wealth?
You might have a few answers in mind, but one of the main areas to wealth building is investing in income producing assets.
These kinds of assets will start generating multiple streams of income for you that help compound your nest egg over time.
Personally, I’ve been a big fan of multiple streams of income well before I even gained any interest in personal finances.
Not sure where that mindset exactly came from at the time, but it always felt like a great way to protect yourself when you have money flowing from various directions.
If companies are able to have multiple revenue streams and have their hands in multiple pools of money, then why shouldn’t the people who actually work for those brands be able to do the exact same thing?” – Roland Martin
Best Income Producing Assets
One thing I learned while teaching myself personal finances, is that you must invest in income producing assets.
Beginners and beyond must master this idea and move forward with doing so.
Income producing assets definition: Simply put, these are assets that help put your money to work and generate more passive income for you.
But, what are some safe income producing assets? What are some assets that beginners should buy? Don’t worry, you are in the right place!
If you are ready to take your finances to the next level and build long-term wealth, below are some of the best income producing assets you need to consider.
And remember in this first section that there is more risk in these assets. But a good investment portfolio helps balance these risks and diversifies your income.
1. Dividend Paying Stocks
Without a doubt, the most popular income producing asset is investing in the stock market. And you have a few options like individual stocks, mutual funds or index funds, and ETFs.
What’s cool about stocks is many of the company’s payout a dividend or a share of money just for investing in them.
There are some major companies that increase the amount of their payouts every year too!
Many stock investors like to play the dividend game to passively live off the returns. Not something you have to do, but dividend investing is also much bigger topic that I’m not going to fully dive in here.
Anyway, you can handpick stocks for dividend investing or index funds, which include a mix of companies with dividend payouts.
In my rollover IRA with Vanguard, I have one such index fund called Vanguard Dividend Appreciation Index Fund (VDADX).
2. Rental Properties
Many, many millionaires have been made through owning rental properties and real estate. And people continue to build their wealth through ownership of property as well.
It’s not the easiest outlet and there is plenty of risk involved. But real estate can also be very rewarding.
By owning rental properties, each month you can collect a nice rent check that pays down your mortgage. Additionally, you build equity in your properties and then later you can be sell your property for potential profit (pending the housing market).
You can buy apartments, duplexes, houses, vacation homes and use services like AirbBnB to make money off your property.
3. Real Estate Crowdfunding
While building wealth has been proven with physical properties, the real estate crowdfunding sites are growing in popularity too.
Instead of the hassle of needing large amounts of money upfront and dealing with the maintenance of owning property, crowdfunding removes some of those limitations.
These platforms do the work for you and instead you choose what real estate to invest in based on your goals. This could be a portfolio of various properties or individual real estate as well.
There are a few variations of real estate crowdfunding platforms, but each offers investors a chance to get a piece of the real estate pie.
Many initial investments are as low as $500 to $1,000. And some of the best ones are:
4. Peer to Peer Lending
Something I have not personally dove into, but a popular option to produce some extra income is peer to peer lending. You may have come across this as P2P or “crowdlending” as it’s sometimes called.
Essentially, you loan money through one of the few P2P platforms to other people. This personal loan is then paid back with interest, thus you make money on it.
It’s great for those who need cash quickly because they don’t have to jump through financial paperwork hoops like they would with a bank. Plus, the interest rates are much higher when they are through banks.
The downside for the investor is that you are potentially relying on someone with rough credit to pay back the loan.
But typically, the P2P vendor will provide risk details on any loan investments you do. For platforms like LendingClub or Prosper, average returns can be between 4-8%.
5. Building An Online Business
One of my favorites on this list is building an online business. There is a lot of potential work up front to build an audience.
But once you create that audience, it can be a great income producing asset. Plus, you can also sell it down the road as well.
Online business can be anything from starting a WordPress website, buying an existing website, e-commerce store with Shopify, Amazon FBA, or maybe a digital product you’re selling (like an ebook).
Many of the businesses that are created online can become relatively passive. Meaning at a certain point, there is not much upkeep needed to continue a flow of income for you.
But do note that there can be plenty of upfront work and time to make this happen. But the money you make can be an added bonus and even potentially life changing.
6. Owning Your Own Traditional Business
I separated this out from the previous section as traditional businesses are a bit different from online businesses. However, they are just as effective as an income producing asset.
And you have a wide range of options here, but just to name a few:
- Coffee shop
- Laundromats
- Car wash
- Bar
- Food truck
However, some of these businesses can take plenty of effort and hard work. And others will require less time and be low maintenance to maintain.
Additionally, there may be some significant upfront costs or need for a store location.
But what you potentially choose to do here depends if you want to work full-time for yourself or just make extra income on the side.
Safer Income Producing Assets
While the above are pretty common options, they do carry medium to high risk pending which ones you consider.
There is nothing wrong with selecting only a few, but you do have some other options.
Below are a few safe income producing assets that might be good for beginners to get started with. Some may still have some risk, but relatively lower compared to the previous section.
7. Savings Account / Money Market
You might not think this truly fits in, but this technically is still a basic income producing asset.
And this is especially true, if you choose the right savings account or money market that gives you decent interest.
If you want to protect yourself from the stock market, real estate, or other investing risks but still generate some income, these accounts are for you.
The challenge here is the interest rates are quite low, so the return on your money is not great. But, your money is not at risk and you can quickly access the cash if needed.
Some of these online banks are my favorites, but any bank with an interest rate above 1% will be pretty good. It’s up to you which bank or money market account fits your current money needs.
8. Certificate of Deposit (CDs)
When I was younger, I had an older family member that used to give me savings bonds and encourage me to have CDs for my future.
While years and years passed, the money that accrued was not groundbreaking. But, I did get interest on my money which was then used for college expenses.
CDs are safe income producing assets that are provided by banks.
They work like a savings account, except you won’t have access to the cash for a particular amount of time.
You are basically just giving a personal loan to the bank for their use, but will earn a set interest after a period of time.
But with inflation rising and pending your CD length, you might actually not make much money. Something to consider if you are thinking about CDs.
9. Bonds
Investing in bonds is similar in a way to CDs. The difference here is instead of loaning the money to the bank, you are loaning it to governments or corporations.
Many times you might be investing in various types of bonds in the stock market, which are safer investments to help balance your portfolio.
And bonds are typically way more stable than stocks and have some guaranteed returns. However, they are smaller returns than say stocks. But remember, with safer investments usually comes lower returns.
Here are a few of the types of income producing bonds that exist:
- Corporate bonds
- Junk bonds
- Treasury bonds
- Municipal bonds
You can read more about bonds here if you are interested in diving a bit further.
10. REITs
If you’ve been a reader of this blog, you definitely have come across REITs before. REITs stand for are real estate investment trusts and are basically the mutual fund of real estate.
Instead of owning rental properties or investing in real estate crowdfunding, these are funds that are operated by companies who own multiple real estate properties.
The money used when you invest goes into the buying and the development of real estate.
This income producing asset helps you avoid the hassle of owning properties. It also diversifies your real estate into corporate buildings, apartments, hospitals, and more.
And what’s cool is that by law, these REITs have to distribute over 90% of their earnings to shareholders. Which can generate some nice income for you.
You can find these in your brokerage account as mutual funds or index funds, like Vanguards VGSLX or their ETF called VNQ.
There are also some private REITs, like stREITwise, which also offers some different diversification and risks.
Additional Income Generating Ideas
Besides the ones listed in the previous two sections, there are some additional income generating ideas you may want to consider too.
I did not go in-depth with these as I have limited experience and knowledge. But just know that they exist and could be potential options for you.
11. Farmland
12. Timber/Wood
13. Royalties
14. Storage Rentals
15. Annuities
16. Private Equity
17. Art Investing (see Masterworks)
18. Tax Liens
Final Thoughts
Ultimately, it will be your choice whether you want to be more conservative or aggressive with your potential investments and assets.
But in order to build wealth and grow your net worth, you will need to invest in income producing assets.
The key in my opinion is to just get started and stay consistent with your investments.
Figure out your financial goals, risk what you can afford, and stay the course with periodic check-ins and rebalances.
The above are some of the common choices as well as some safer options to consider as well. These are not all the income generating ideas, but should be a great place for you to start.
Hope this helped!
What are the most profitable assets?
Some of the most profitable income generating assets include:
- Dividend Paying Stocks
- Real Estate Crowdfunding
- Real Estate Investment Trusts (REITs)
- Online Businesses
- Rental Properties
- Peer to Peer Lending (P2P)
What are good assets?
Good assets are items you can invest in that will produce income for you like stocks, rental properties, real estate crowdfunding projects, and an online business. These can also appreciate in value overtime besides generating money for you.
What income producing assets are you investing in currently? Which ones have caught your eye and you might be looking into? Are there others you really like not on this list? Let me know in the comments below.