Today I am going to look at five income generating assets that are actually worth owning.
A good book has a lasting impact. It could be an idea, insight, or titbit of wisdom that stays with you.
And every once in a while, you’ll read a book that delivers a message so powerful that it changes your behaviour
Rich Dad Poor Dad was one such book for me.
The simple story of a boy with two dads – one his real dad (a broke teacher) and the other a fatherly figure (a wealthy and successful businessman) – wasn’t all that entertaining, but the lessons shared were profound:
“Rich people buy assets that generate income. Poor people buy liabilities that they think are assets (big homes, cars, toys).
Assets put money into your pocket; liabilities take it out”.
These lessons shifted my perspective.
They’ve guided my behaviour and attitude towards money ever since.
A decade since reading Rich Dad Poor Dad, I still make it a priority to save some of what I earn and invest it in assets which generate income.
Investing for income is the quickest way to build sizeable passive income.
BUT, not all investments that pay an income are worth owning – I’m looking at you, savings accounts.
In this post, I’m going to share my top five income-generating assets that are actually worth owning.
Let’s get into it…
1. Dividend Paying Exchange Traded Funds (ETFs)
Established businesses reward their shareholders by sharing some of the profits in the form of a dividend.
Dividends are a fantastic source of passive income as you get paid by a business without having to deal with the headache of running it.
But that doesn’t mean you get to put your feet up.
As a diligent investor – which you are, aren’t you? – you’ve still got to monitor the companies that you invest in to ensure your dividend is safe.
That means keeping on top of company and market news, reading annual reports, studying balance sheets, and researching competitors.
How to invest in ETFs
You need to choose a reputable trading platform with low fees. eToro is one of them! It offers commission-free trading in stocks and some ETFs and is supervised by top-tier regulators, including the FCA in the UK. The platform is very user-friendly and includes a Social Trading feature that allows you to copy other traders’ moves. It also allows fractional shares investing so that you can invest in a portion of a single share. Plus, if you’re a novice when it comes to investing, the platform also features an educational section. You can also create a demo account with play money to test the platform. On the downside, it charges a withdrawal fee of $5 per withdrawal, and it has only one base currency account (USD).
In sum, if you want to include ETFs in your income producing assets bag, check out eToro, create an account and start investing! The account opening process is super fast, hassle-free and completely digital. For more information, check out my eToro review.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
2. Peer to Peer (P2P) Lending
I’ve been investing in peer-to-peer lending for about three years.
If you’re not familiar with P2P lending, it’s where you lend to individuals or businesses directly through the help of a platform.
In exchange for lending your money, the borrower will pay you a healthy return on your loan every month.
This trumps my highest paying high-interest savings account, where I’m earning a paltry 0.7% – OUCH!
Now, there are risks with peer-to-peer lending: there’s the chance the borrower defaults or the platform goes bust.
To mitigate these risks, I don’t try to pick individual loans to invest in, and I leave it up to the platform managers to do proper due diligence on borrowers.
I also only invest in established P2P platforms that have a low default history and hold an adequate provision fund.
3. Buy-to-let Property
Despite the ever-increasing taxes and legislation surrounding property investment, buy-to-let remains one of the top income-generating assets in the UK.
What makes rental property such a great investment?
CONSISTENT CASH FLOW.
You get paid every month from each of your tenants.
Of course, you’ve got mortgage payments, buildings insurance, property management and maintenance to pay, but IF you buy right, there will be a surplus of rental income to pocket each month.
A 15% return on investment is easy to achieve with a standard BTL, and returns of 50% or more are achievable using advanced strategies.
I’m a huge fan of BTL property (it makes up the bulk of my portfolio), but it does come with some downsides.
If being a landlord isn’t for you, then there’s always…
4. REITs (Real Estate Investment Trusts)
If you don’t want to invest in property directly, then you can still get the benefits of rental income and capital appreciation by investing in Real Estate Investment Trusts (REITs).
REITs are similar to stock funds, but instead of pulling investors’ money together to invest in companies, REITs invest in property.
REITs give smaller investors several advantages:
Access to the property market without significant upfront costs – no need to save a big deposit and pay all the other “hidden” costs of property investment (legal fees, finance fees, taxes).
They reduce risk by spreading your investment across several properties instead of having all your eggs in one house.
They allow you to own assets that you may not otherwise have been able to afford – prime commercial property, for example.
REITs are traded on the stock market, making them more liquid than BTL property.
REITs offer a healthy yield of around 4-6% – One of the conditions of a REIT is that it must pay at least 90% of its rental profits to shareholders.
Consistent income! It doesn’t matter whether property prices are going up or down, tenants still have to pay rent.
REITs are shaping up to be a pretty good investment, right?
If you’re thinking about investing in REITs, I’d consider logistics REITS – like Tritax Big Box (LSE: BBOX) or Urban Logistics REIT (LSE:SHED) – as demand for online shopping looks likely to increase.
Alternatively, the healthcare sector has always had steady demand, which I think will increase with an ageing population.
REITs like Target Healthcare REIT (LSE: THRL) or Impact Healthcare REIT (LSE: IHR) will allow you to invest in healthcare accommodation with ease.
5. Online Businesses - Blogging
The blogs you frequent aren’t producing content for the hell of it.
No, they’re doing it because it’s lucrative… extremely lucrative. Some of these little “hobby blogs” bank tens of thousands each month.
Two of the blogs I follow make more than £1 million a year!
And Adam Enfroy, who blogs about making money online, brings in a similarly astonishing stack every month – his blog is making an average of $1.5 million a year!
I fully appreciate that these bloggers may be outliers.
But even on the low end, plenty of bloggers make a full-time living online.
If you’re tech-savvy or willing to learn, you can start an online business for next to nothing and create another income source. And if you have the cash and the kahunas for it (it’s a risky venture, after all), you can buy a site that’s already making money.
So let’s cut to the chase and tell you how to start, monetize and sell a blog.
How to Start a Blog
First things first, so you need to come up with a domain name. Don’t take too long on this step. In the long run, it won’t matter. You need to chose a hosting services provider. WP Engine is a great solution. Although a bit more expensive (starts at $20 a month) than the entry level hosts, it is very fast and reliable!
Once you have your website, install WordPress and as far as themes go you can use Astra websites to help you build your website in no time. For visual help, here is a video on how to set up a website.
Once your website is ready, you only need two plugins. WP Rocket will increase your website speed. Wordfence will keep your website safe from malware and spam.
After this is done, it’s all about content; this is where SEO comes in handy. The best way to learn about SEO is by trial and error. You need to experiment to learn what works and what doesn’t. However, suppose you want a course that can explain most things, from the basics to the more complex stuff. In that case, I recommend Mike Pearson’s Stupid Simple SEO course.
How to Monetize a Blog
You should write about what you’re passionate about. However, you must match it with search intent, in other words, what people are searching for. This is where keyword research comes in. So start by doing keyword research and creating a content calendar. Yet, not everything is monetizable, and there are really only two ways of monetizing a blog: affiliate or ads.
In affiliate marketing, you get a commission every time a person buys a product or service you recommend. Start by joining an affiliate network such as ShareASale, and search the different merchants and their offerings. In the case of ads, you earn X amount for every 1000 visitors (called RPM). You have to generate lots of traffic to make real money with ads.
You should develop a strategy for your blog based on your specific monetization tactic. Evidently, you can use both tactics and write informational content with lots of volume and affiliate articles to generate your fat commissions.
How to Sell a Blog
Online businesses usually trade at 20x to 36x monthly earnings.
The valuation depends on quality factors such as the age of the site, its traffic sources, its backlink profile, and the number of income streams it has.
But even at the higher end of the valuation, these digital income-producing assets offer returns of 33%!
If you fancy yourself as a digital entrepreneur, then Flippa has an excellent marketplace for picking up established online businesses.
Financial independence – the end goal for many – happens when you have enough passive income that work becomes optional.
And the quickest route to job-replacing passive income (for most people), is to save as much earned income as possible and invest it in assets that generate income.
The best advice I can give you today however is to start early and save a small amount regularly.
Dividend-paying shares provide the lowest barriers to entry and the easiest access to income-generating assets.
Freetrade allows you to invest in shares, funds and indexes that pay dividends (income) from as little as £2, and with no fees.
So there really are no excuses.
That’s the path I took to achieve financial independence. And the five assets in this post are what I invest for income.
In my opinion, they provide the perfect balance of diversification, leverage, low time commitment, and high cash flow – all of which are important to me for reaching my goals.
But that’s just my two cents. If you happen to stumble upon a solid investment that pays well, please share it in the comments.