16 Best Cash Flow Investments – Earn Passive Income

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Multiple streams of passive income can come in the form of cash flow investments. Check out our list of the best cash flow investments you can take advantage of.

Relying on a single source of income can be dangerous but sometimes adding another source can be tricky. After all, most often you’re devoting a large amount of time per week to your main source of income. Adding another one can potentially push you over the limits physically and mentally and undo any benefits you might enjoy from another income source. 

However, there are cash flow investments you can use to increase your wealth with efficiency in mind. These passive income opportunities cater to several types of investors, from those who know a thing or two to beginners wanting to get started. No matter which cash flow investment you choose, you can be sure it will help you build wealth without breaking you down. 

Our list of the best cash flow investments below is a great place to start if you’re not sure where to devote your time. We’ll also guide you in deciding between cash flow investments to make the most of your time and effort. After all, what’s extra income if you can’t use it to achieve peace of mind? 

Are you ready to learn more about cash flow investments? Let’s get started!

How to Compare Cash Flow Investments 

With the wide variety of cash flow investments available to investors, it can be difficult to figure out which one is the best for you. Here are a few characteristics you’ll want to take a look at when you compare cash flow investments:

  • Risk: Everyone has their own appetite for risk. Generally speaking, it’s common practice to have a wide spread of risk in a diverse portfolio. 
  • Rate of return: Rate of return will vary from one investment to the next, even if they are the same type of investment. Most investors look for a high rate of return but that’s not the only deciding factor. 
  • Length of investment: While most investments for cash flow are long-term, there are opportunities to invest in the short-term as well. You should be aware of and comfortable with how long your money will be tied up in an investment before you sign any agreements.
  • Familiarity: Relying on your own knowledge of and experience with a cash flow investment can help you navigate your options with greater ease. At the same time, it can be a fun challenge to learn about a new investment.

Many of the cash flow investments on our list below can be managed with specialized software and/or apps, like those you would use to track your finances and net worth. If you’re old-school, you can also use a notebook or Excel document to track your investments and see where you’re getting your best returns.  

Best Cash Flow Investments

The opportunities below offer some of the best cash flow when it comes to earning through passive income. Which one(s) will you choose to increase your wealth?

Affiliate Marketing

These days, it’s easier than ever to earn passive income through affiliate marketing. This is especially true when you consider social media apps that make it much easier for companies to reach their target audience. The best social media affiliate marketers, or “influencers,” can often make enough passive income that they don’t have to work a regular full-time job. 

To earn money passively with affiliate marketing, you’ll need some kind of online presence. This could come in the form of social media channels and/or blogs where you share the affiliate links that earn you passive income. Once you’ve established yourself online, you’ll need to register with top retailers in your niche to obtain affiliate links. 

These links report back to the company who referred a customer to them and provide you with a commission based on the terms of the affiliate agreement. Not all affiliate marketing is about physical products. In fact, you can earn quite a bit of money just from selling software, apps, or other digital products. 

Affiliate marketing is a type of online marketing that does take some effort, but it provides variable returns. While the level of risk involved can vary from one opportunity to the next, it’s moderate compared to other types of cash flow investments. 

Annuities

If you are risk-averse, you might consider annuities. These investments can provide a solid retirement income you can depend on in the future. Most annuities are long-term with fixed rates of return. 

It’s common for annuities to mature a few years after you buy them in terms of providing regular income. However, you can also purchase immediate annuities that pay out immediately. Annuities can be a complex investment product, so be sure to review your options carefully before making any decisions. 

Bonds

Bonds are a type of micro-investing option that allow you to earn income by lending funds to either the government or corporations. Bonds are best if you’re close to retirement because they are low risk and typically hold a specific interest rate. 

Many government bonds come with tax benefits. You also have the option of selling bonds on the secondary market. Most bonds holders, however, hold them until maturity while collecting interest. Once the time limits have been met, you’ll get your initial investment back. 

Bond Funds

The average maturity of bond funds is less than 10 years. These low-risk cash flow investments are more stable than long-term bonds and are less sensitive to interest rate changes. Returns are fixed with bond funds, which makes them a favorite of investors who are looking for a steady income. 

Intermediate bond funds have a higher interest rate than bank/treasury securities typically. Plus, you can increase the diversity of your portfolio. 

Certificate of Deposit 

CDs, or certificates of deposit are similar to savings accounts that hold your money for a specific period of time. These funds are held within FDIC-insured accounts typically, which earn interest based on how much money is within the account. 

While most CDs are long-term investments, you can also choose short-term CDs. If interest rates keep increasing, you can easily reinvest those funds further to increase your cash flow. However, if you choose to remove funds early, you will lose both the interest and some money to pay for the associated penalties. 

CDs are typically considered low-risk, as they provide fixed returns. Before you choose a CD to invest in, you should compare interest rates to get the most for your deposit. 

Dividend-Paying Stocks

Reliability and consistency are what dividend-paying stocks are known for. These price-stable stocks, or pure growth stocks, don’t typically see a huge jump in profits as you might see with high-risk stocks, but sometimes that can be worth it when you think of the steady income they provide. 

If you want to invest in dividend-paying stocks, you should find ones that have a yield higher than 1%. You might even find some that can provide capital appreciation as well. In contrast to bonds, stocks that pay dividends can increase over time. You can easily use dividend trackers to keep tabs on stocks like Coca-Cola, Microsoft, and Procter & Gamble.

Exchange-Traded Funds

Is all this talk of stocks, bonds, and such boggling your mind? Beginners who want to invest but aren’t sure where may find it easier to start with exchange-traded funds, or ETFs. These funds invest in productive dividend-paying stocks to ensure you don’t overinvest in a single particular stock. This can help diversify your portfolio and reduce your overall risk. 

Most ETFs are professionally managed. They also offer high liquidity, so it’s easier to get out of them if you find something else you want to invest in. With fractional shares available as well, you don’t need a lot of money to start investing. 

High-Yield Savings Account

Though it’s not the most fun investment to make, a high-yield savings account can help you prepare for retirement, especially if you’re nearing retirement age. A high-yield savings account will bring consistent returns, even more so than your average savings account

When deciding between high-yield savings accounts to open, it’s best to compare rates and shop around. Most high-yield savings accounts can have an interest rate of anywhere from 3% to 5%. Though most of these accounts are FDIC-insured, they’re limited typically to $250,000. If you have more than that to place in your high-yield savings account, you’ll want to either spread your funds out across multiple accounts or find one that has a higher limit. 

Money Market Accounts 

Investing in money market accounts can help you make the most of your savings to earn a higher interest rate. Similar to high-yield savings accounts, they offer higher interest rates than you’d typically have access to with traditional savings accounts. 

One of the best features of money market accounts is that you can withdraw and spend funds from those accounts without being penalized. However, you are limited to so many transactions within a specific time period. Most investors consider money market accounts to be low risk. You will need a higher deposit than you would with high-yield savings accounts, but otherwise they’re an easy investment to make if you’re looking to increase your cash flow. 

Mutual Funds

Mutual funds are another low-risk cash flow investment.They’re great for people who don’t want to have to pick and choose which stocks to invest in. Instead, investors pool their money into a fund that invests in different securities, which are often industry-specific. 

The rate of return for most mutual funds is dependent upon the market. If you’d like to learn more about mutual funds, check out Our Guide to Mutual Fund Investing for Beginners.

Peer-to-peer loans 

You’re probably familiar with loans after taking out specific amounts for tuition, cars, or even personal loans. However, peer-to-peer loans offer a more direct route that can be lucrative for many investors. While they may be higher risk than some of the other investments on our list, they do allow you to achieve a higher rate of return by cutting out the middleman.

For example, Lending Club and Prosper allow you to connect with your peers to offer loans. You can either purchase an entire loan or what’s known as a “note.” This note is a slice of a loan and can cost you as little as $25. Purchasing multiple notes can help you diversify your portfolio and also reduce the overall risk. 

REITs

Real estate investment trusts, or REITs, are simply mutual funds that allow you to invest in real estate such as office buildings, retail centers, apartments, medical facilities, and other commercial properties. You can easily buy and sell shares in REITs through major brokerage firms. 

Most REITs mirror the stock market, so they can be volatile at the worst of times. However, you will gain access to 90% of the profits, which are distributed via dividends. You may even be able to benefit from capital appreciation when the trust sells the property you’re invested in. 

REITs are either public or private, based on how they’re traded. Public REITs are more common, but with private REITs, the trusts are privately owned and invested in commercial real estate. Most private REITs don’t score high in liquidity, as they’re typically held for 5 years or longer. 

Real Estate

Investing in real estate for a reliable cash flow is nothing new, but it’s a great way to ensure that you can not only cover your rental property’s mortgage, but earn a small profit as well. Many investors use rental income to supplement their main source of income in addition to taking advantage of tax benefits. 

You may also be able to profit from real estate in terms of capital appreciation. Plus, when the rental property is paid off, you can choose to keep or sell it for more profit. Holding rental properties can even increase your net worth as rental rates increase over time. 

Most real estate investments are more of a long-term commitment than other types of cash flow investments. However, you can choose to rent short-term by listing your property on Airbnb. While most rental real estate investments are low risk, you might consider REITs if you’re looking to diversify. At the same time, it’s easy to invest $10,000 in real estate and make good on your return with the right investment. 

Real Estate Crowdfunding 

There are many choices available to you if you want to invest in real estate, including real estate crowdfunding. This type of cash flow investment is available to both accredited and non-accredited investors, widening the opportunity for investors of all walks of life who want to build their wealth. 

In real estate crowdfunding, you do not own properties personally, but instead invest in specialized properties through a fund. This fund buys either raw land to be bought and developed or existing properties to buy, develop, and sell. Most real estate crowdfunding loans are short-term, which ups the liquidity rate of this particular asset. Investors use platforms such as Fundrise to invest in real estate crowdfunding. 

Retirement Accounts

Individual retirement accounts (IRAs) allow you to invest your money in return for tax benefits. Many investors appreciate the compounding power of retirement accounts that also allow them to invest in stocks, bonds, and other assets. 

Roth IRAs are one of the more common retirement accounts to invest in, as they offer anywhere from 7% to 10% average returns. At the same time, the returns you make will depend largely on what types of investments you choose. For many people, contributing to an IRA up to the maximum amount can help prepare for retirement and mitigate risk. Several investors recommend using IRAs as one of the most basic retirement planning tools.

Royalties

Though more of an unconventional investment, royalties can provide consistent income with moderate risk. Royalties are lesser-known than other types of cash flow sources, perhaps because the terms and conditions vary from one to the next. As such, the rate of return is variable at best. 

Many common royalty investments concern licensing arrangements for things like music videos, mineral rights, oil and gas rights, etc. Each deal is unique, so it’s very important to read the fine print to understand what you’re benefiting from. That said, many people find royalties to be one of the more lucrative alternate ways to invest.  

FAQs

Which cash flow investments are best for beginners? 

Mutual funds and ETFs can be some of the best cash flow investments for beginners. However, that’s not to say you couldn’t start with any of the other investments on our list and simply spend more time researching and learning about the subject. 

How much can I earn each month with cash flow investments? 

It’s hard to put a number on how much you can earn each month with cash flow investments. With that said, the most successful investors use cash flow investments not only to replace their main source of income but also to build wealth as well. 

What are the best forms of passive income? 

The best forms of passive income are those cash flow investments you understand and benefit from. Some investors may find it easier to purchase ETFs or mutual funds, while others want to investigate what royalties can do for them.

Stimulate Your Cash Flow by Investing

We hope you’ve found this article on cash flow investments useful in understanding what opportunities are available to you and how much you can potentially earn from each one. While there’s no one-size-fits-all approach for cash flow investments, the general idea of increasing your wealth is possible. Plus, with so many choices to pick from, you can easily switch from one investment type to another if things don’t work out.

About the author

Brian Meiggs
Brian Meiggs
Brian Meiggs is a personal finance expert, and the founder of My Millennial Guide, a personal finance site helping you put more money in your pocket. He helps millennials follow the smart money in order to increase their earning potential and start building wealth for the future. He regularly writes about side hustles, investing, and general personal finance topics aimed to help anyone earn more, pay off debt, and reach financial freedom. He has been quoted as a top personal finance blogger in major publications including Yahoo! Finance, NASDAQ, Discover, MSN Money and more.
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