The key to financial freedom isn’t a great job or even a pile of money because both will eventually deplete over time. You can’t work forever nor will a pile of money last forever. The key to financial freedom is to have an never ending flow of income arriving regularly to your coffers.
I asked my favorite AI to give me a list of the best income producing assets and here is what I got.
Income-producing assets are investments that generate earnings regularly and can be a critical part of a diversified portfolio. Here are some of the commonly recognized best income-producing assets:
Dividend Stocks: Shares of companies that pay out a portion of their earnings to shareholders. They can provide a steady income stream and the potential for capital gains.
Bonds: When you buy a bond, you’re essentially lending money to a corporation or government. In return, the issuer promises to pay you a set rate of interest during the life of the bond and to repay the principal when it “matures,” or comes due.
Real Estate: Owning property can generate income through rent. Real estate can also appreciate in value over time, offering a combination of income and capital gains.
Real Estate Investment Trusts (REITs): Companies that own, operate, or finance income-producing real estate. REITs provide a way to invest in real estate without having to own physical properties, and they typically distribute the majority of income to shareholders.
Peer-to-Peer Lending: This involves lending money to individuals or businesses through online platforms that match lenders with borrowers. The return comes from the interest paid by the borrowers.
Business Ownership or Private Company Investments: Investing in a business can yield income if the business pays out profits to its owners.
Royalties: Earnings from licensing your intellectual property, such as patents, copyrighted works, or natural resource rights, can provide a source of income.
Annuities: Financial products sold by insurance companies that pay out a fixed stream of payments to individuals, typically used as an income stream in retirement.
Certificates of Deposit (CDs): Time-bound deposit accounts offered by banks with a fixed interest rate for the term of the certificate.
Money Market Funds: These funds invest in short-term debt securities and can offer a steady, although typically low, income stream.
High-Yield Savings Accounts: These accounts offer higher interest rates than standard savings accounts, making them a low-risk asset for income.
Business Development Companies (BDCs): Organizations that invest in small and mid-sized businesses and are required to distribute the majority of their profits to shareholders.
Investment in these assets should be done after careful analysis of the risks, time horizons, and expected returns, as well as consideration of one’s own financial situation and goals. Consulting with a financial advisor is often advisable to create a balanced and diversified investment portfolio.
The underlined items above are investments that I have now. And I have owned pretty much everything on the list at one point or another but rotated in/out of a few. Bank Certificate of Deposits aren’t much interest to me these days because T-bills usually pay higher interest and are exempt from state income tax while CDs are not.
In future posts, I’ll dive a little deeper into each topic and the importance of diversification.