The most successful people don’t just make money by the hour. They build passive income streams so they can make money while they sleep, too. But you don’t need to be wealthy to do this. Below, you’ll see a few ways to earn passive income with a $1,000 investment.
To be clear, you’re not going to earn a lot of passive income by putting in $1,000. If that was possible, everybody would do it. But you can get the ball rolling and build on it as you have more money to invest.
1. Invest in a REIT
Traditional real estate investing is out of reach when you’re on a tight budget. You can’t exactly buy an apartment building with $1,000. But you can invest that money in a real estate investment trust (REIT) — a company that owns income-producing real estate. You can buy shares in REITs through a stock broker, just like investing in stocks.
REITs are legally required to distribute at least 90% of their taxable income to shareholders. For that reason, they tend to pay high dividends. Their average dividend yield is about 4%, and on a $1,000 investment, that’d be about $40.
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If you don’t have a brokerage account yet, Robinhood is a beginner-friendly option. You can use this broker to invest in REITs, stocks, ETFs, and much more, with $0 commissions. Click here to learn more and open an account today.
2. Buy Treasuries
The U.S. government sells Treasuries to help finance its operations. You can buy them through TreasuryDirect, and since they’re backed by the U.S. government, they’re as safe as it gets. There are three types of Treasuries available:
- Treasury bills (T-bills) with terms ranging from four to 52 weeks
- Treasury notes (T-notes) with terms ranging from two to 10 years
- Treasury bonds (T-bonds) with terms ranging from 20 to 30 years
Interest rates are reasonable for the level of security these provide. At the time of this writing, 20- and 30-year T-bonds are paying over 4%, and you receive interest payments every six months.
3. Put it into a high-yield savings account
For a simple option, you could deposit money into a high-yield savings account. While most savings accounts don’t earn much interest, high-yield accounts are the exception. Many of them earn 4% or more per year.
On a $1,000 deposit, you could earn over $40 in yearly interest. And the best part is that it’s a risk-free return. You don’t need to worry about losing money, which can happen with investments.
If you’re not earning at least this much on your savings, you’re leaving money on the table. To maximize your earnings, consider the UFB Portfolio Savings Account. It has a spectacular 4.57% APY, no monthly fees, and no minimum balance requirement. Click here to find out more and open this savings account today.
4. Invest in dividend stocks
Earlier, we discussed REITs and how they can deliver passive income in the form of dividends. There are plenty of other types of companies that pay dividends as well.
If you want investments that will pay you money on a regular basis, look for stocks with a high dividend yield. You can normally find this information through your brokerage account. The top stock brokers include dividend yields as part of each company’s fundamentals.
Keep in mind that a large dividend isn’t everything. The company also needs to be a worthwhile investment. Reputable companies with high dividend yields generally pay anywhere from about 2% to 4%. It’s not a massive amount of passive income, but the money you invest can also grow with the company.
5. Open a CD
Certificates of deposit (CDs) are another simple passive income strategy. When you deposit money into a CD, you earn a fixed interest rate until the CD’s maturity date. You decide how long of a CD you want. The most common options range from one month to five years.
The highest-paying CDs are currently offering 4% to 5%, enough to earn $40 to $50 per year on a $1,000 deposit. Note that you need to keep your money deposited for the entire term to get the most out of a CD. If you withdraw it early, there will be a penalty.
These are all fairly easy passive income streams that you can start with $1,000. You won’t make enough money to quit your day job, but you’ll be taking the first steps toward building long-term wealth.
