5 investment ideas for passive income for life

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I’m looking for new passive income streams. My main goal is to diversify my investments, giving me the best chance of stable income during times of increased market volatility that will inevitably occur throughout my life.

Here are five passive income ideas I’m exploring today.

1. Dividend Aristocrats

Dividend Aristocrats are companies that have increased payouts to shareholders over long periods of time. They are often established industry leaders with low debt and high profitability.

Good examples of FTSE100 include consumer defensive actions British American Tobaccohealth office GSKand financial standing Legal and General Group. They give 6.6%, 6.8% and 10.4% respectively.

Of course, too much focus on these actions carries risks. For example, my portfolio might have low exposure to certain sectors like technology. I could also be overlooking better opportunities for capital growth elsewhere in my quest for steady dividend income.

Still, as passive income generators that have a good chance of withstanding recessions, they are a great starting point for me.

2. High Yield Dividend Stocks

I would also buy high yielding dividend stocks. Admittedly, exceptionally high returns often result from huge drops in stock prices, which could signal problems for a company’s bottom line. As dividends can be reduced at any time, I consider these investments to be high risk games, but I’m ready for that.

FTSE250 commodity trader and miner Ferrexpo is a good example. Its current dividend yield is 33.6%. The company has significant geographic exposure to Ukraine. Its stock price fell 62% over 12 months, largely due to a flash crash following the Russian invasion in February.

As a result, Ferrexpo shares would only form a small proportion of my total passive income portfolio.

3. REITs

A good way for me to diversify away from traditional stock market holdings is to invest in real estate investment trusts (REITs). Real estate investments often operate on a different market cycle, and REITs offer passive exposure to this sector.

A REIT that I like is British land, a constituent of Footsie which focuses on high quality retail and office space in London. It currently yields 6.3%.

Admittedly, rising interest rates are putting pressure on property prices, which is a headwind for UK equities. But to me, it’s a price to pay for the benefits of diversification.

4. Fixed income funds

Fixed income funds are another great source of passive income. They often invest in obligations or other debt securities and pay distributions on a fixed schedule.

One of the main advantages of bonds is that they tend to be more stable than stocks and act as a diversifier. However, new doubts are cast on this received wisdom. For example, the recent chaos in the gilt market has damaged their traditional reputation as a low-risk investment.

Nonetheless, I still consider holding some bonds a valuable part of my passive income arsenal.

5. Index funds

Finally, I like simplicity. Invest in an index fund that tracks the price performance of an index, such as the S&P500 or FTSE 100, can produce great rewards. Currently, these indices yield 1.8% and 4.1%.

Indeed, Warren Buffett advises people to regularly invest in a low-cost S&P 500 tracker fund. Although index funds don’t beat the market, I’m heeding the billionaire’s advice. Therefore, they are a crucial part of my passive income investing strategy, although picking individual stocks is my primary focus.

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