FinLEAP (financial leap) your finances – Part 4: Passive income streams
FinLEAP (financial leap) your finances – Part 4: Passive income streams
Last week we have discussed the importance of passive income streams to achieve financial freedom. I have shared 4 ideas on how to get passive income via investments. If you missed the article, check it out here. So, this week, let’s review other passive income methods.
The 4 methods I shared in my previous articles are the popular ones. Those methods are suitable for beginners. This week, I’m going to share with you something that requires more efforts or more capital.
1st is bond investment. Bond is a type of debt-based investment instrument. Bonds are normally offered by government or corporate. When you are investing in a corporate bond, it means you are lending money to the company. If you are investing in the government bond, it means you are lending money to the government. In return, the government or the company will pay you fixed interest at the interval agreed upon issuance of the bond. The bond interest is called coupon and most companies pay annual coupon to the bond investors. Some companies will choose to pay the interest semi-annually. The full amount will be repaid to the investors on the maturity date.
Look at this example, this is a corporate bond issued by Ambank. It is a bond offering 4.18% interest and the bond will expire on 28 March 2031. If you look at the further details, the coupon / interest is being paid semi-annually. When you invest in bond, you need to check out the issuer credit rating. This credit rating shows the credit worthiness of the company. If the rating is good, normally the interest is lower. The higher the risk, the more interest you can get. Ambank is rated at BBB+ by Standard & Poor (S&P) rating agency. You can find out more about credit rating from Google.
This is another bond offered by Wanda Group. This is considered a high yield bond as this company is offering 8.875% coupon rate to the bond holder. However, if you look at the credit rating, there is none. So, the credit worthiness of the company has not been rated by the established credit rating firm.
Something to note in investing in bond is that it requires higher capital to start with. Most of the corporate bonds have high initial investment amount, mostly starting from RM 200,000 and above. All these bond products are only accessible through premier banking service or licensed advisors. Recently, Bondsupermart has launched secondary market platform to trade bond. Hence, now retail investor is able to buy bond at secondary market via www.bondsupermart.com.
With the launch of this platform, the starting capital is as low as RM 5,000. The interest for the bond will vary compared to the first issuance of the bond.
For example, when the bond was issued by Wanda, the coupon / interest was 8.875% with USD 100 bond value. When it is in secondary market, the bond price will fluctuate and it is now selling below USD 100. Due to this, the actual interest will be more than 8.875% considering lesser capital required.
2nd is the peer-to-peer lending. This is also a debt-based investment which you lend money to the companies to get some fixed interest during the lending period. Some of the approved peer-to-peer lending platform are www.moneysave.com.my, www.fundingsocieties.com.my , www.fundaztic.com. The interest offered by the companies are higher than bond investment and mostly with lesser lending period. However, the companies are mostly smaller and hence carry higher risk. Due to the risk, you need to do more research when you are investing in such scheme. Also, the duration is shorter, so you need to keep looking for more opportunities to get constant passive income. Good thing about this is you can start investing from minimum RM 100 only.
3rd you can also sell intellectual properties like e-books or courses apart from investing. What you need is to spend some efforts in producing some contents. You can publish your e-book on Amazon to sell. For e-courses, you can publish your e-course at www.udemy.com. What do you need to do is to ensure what you are producing are contents which many people want and you can get some passive incomes from these products. Once the product is out, minimum effort is required.
4th is the venturing into business opportunities which offer multi-level marketing incentive. While you recruit more team members into your business, you get overriding incentive on your group sale. This needs a lot of effort initially in building a strong sale team including conducting sales training to your team and helping your team on the sale process. But, you can see lucrative reward and massive passive income stream when the team is matured and stable.
After understanding some many types of passive income generation methods, it is time to plan out with one you can include in your portfolio.
Watch the Youtube video here on this topic.
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