Passive Income - Home - finance

Relaxing in palm tree
Passive income is money received on a regular basis with little effort required to maintain it.

Examples would be interest from savings, Peer-to-peer lending, adverts on web sites, company shares and mini-bonds.

  1. Savings. To earn from any normal savings account, you first must have cash to put in it. Unfortunately since the crash of 2008, the maximum interest is between 0.1% ~ 1%. Some will go as high as 3% if you are prepared to lock your money away for a few years. You also run the risk of a "haircut" where a bank runs into trouble and takes some of your money eg Cyprus. I only keep a small amount in my savings accounts for emergency bills.

  2. P2P (Peer 2 Peer) Lending has come of age. The first one was ZOPA and it was closely followed by a few others.

    • ZOPA was started in 2005 headed up by Giles Andrews.

      • They allow you to lend cash directly to other people.
      • You only lend £10 to each person so if they default you only lose that £10.
      • They have two levels of interest: Zopa Classic at approx 5.0% and the slightly riskier Zopa Plus at approx 6.0%.
      • They return your principle and interest daily into a holding account.
      • You can choose to automatically re-lend this or transfer it into your bank account.
      • A good technique is to keep a few thousand £ in your holding account for emergencies.
      • ZOPA means Zone Of Possible Agreement.
      • I have been using them since 2006 with no problems.
      • They used have a party in London every year where you get to meet the founders and other users.

    • Funding Circle

      • They allow you to lend cash directly to companies.
      • Returns are typically between 6% ~ 7.2%
      • They have an Investors meeting every year in London.

    • Lend Invest

      • Invest in secured property loans.
      • Return on Investment is typically between 5.0% (often) ~ 8.0% (rare)
      • The principle and interest are paid at the end of the month.
      • Terms are typically 10~14 months. Some get paid back early, some late.

  3. Stocks, Shares and Bonds

    • CrowdCube allows you to invest in start-ups. They offer three ways to do this.

      • Equity. The minimum investment is £10 and has a high risk of default.
      • Mini-Bonds are basicaslly a loan. You will typicaly earn 8% per year for 4 years. The minimum investment is £500 and is taken from your account by either Direct Debit (GoCardless) or Credit card (Stripe). NOTE: These seem to be losing popularity and may well be stopped. Mini-Bonds are low (NOT ZERO) risk.
      • Venture Fund. The minimum investment is £2,500 - I think this has been stopped.

    • WiseAlpha allows normal people to earn interest from bonds that would normally be too expensive.

      • Normal returns are between 3% ~ 8% but there are high-yield bonds available that go as high as 11%
      • WiseAlpha was founded by Rezaah Ahmad who is responsible for driving the strategic growth.
      • They are located in Canary Wharf, London.

  4. Websites are a good way to earn passive income. Building websites can be done anywhere you can take a laptop and there is a half-decent WiFi service. They come in three main types :-

    • Static or Brochureware Many of the websites will be like this.

      • Easy to create. Many web-hosts have web-creation tools and templates.
      • Can be done for free. -
      • Little interaction with visitors.
      • New content needs to be uploaded.

    • Blogs

      • Easy to create and use. -
      • No technical expertise required.
      • New content can be entered on-site and made visible immediately.
      • Various components (widgets) can be easily added. eg Hit-counter, guest-book

    • Dynamic

      • Two main types: CMS (Content Management Systems like Drupal, Joomla and django) and bespoke (eg you build it)
      • Very hard to setup.
      • Developer is responsible for updates and security.
      • There are many free resources available help you get started.
      • Open Source operating systems like Linux (or FreeBSD) will have these tools built-in or available as a free download.

  5. Adverts and affiliate links

    • You need to have a website or a blog for this to work.

    • Adverts can be supplied by AdSense. They supply some HTML code that you copy into your website. When a visitor clicks an advert on your site, you get paid a tiny amount, typically £0.01 ~ £0.10. Don't click your own adverts !

    • Affiliate Links are similar to adverts except they encourage visitors to leave your site to join another. When they do you get a percentage. At the lower end is Amazon who pay about 5%. At the top end are Gambling Sites who can pay up to £100 for referring a paying member.

  6. Crypto Currencies Many exchanges have a feature called Staking. This is where they pay you interest by holding your cryptocurrency on their platform. Here are the returns for (2021 Apr 05) :-

    • TON 12.5%
    • ZIL 20.0%
    • XTZ 5% ~ 6%
    • DOT 10.0%
    • MATIC 10%
    • ATOM 8% ~ 9%
    • ADA 3% ~ 4%
    • MHC 20%
    • TRX 3.5%

(C) 2018 ~ 2022 Theia - Stats