Ten years back, I could die to learn about passive income ideas viable in India.
Back then there were only few. Today we can do much more.
At some stage in our life we all start getting excited about generating alternative source of income.
But that enthusiasm is soon lost among the hustle and bustle of everyday life.
Our daily life is all cramped-up for time. After we return back from office, we have virtually no time left.
We are drained and all we can do is slouch on the sofa and watch TV.
At that time who cares for alternative income….
If it happens its ok, but for that moment, all we need is a cup of tea and live streaming IPL match. 🙂
Does this sound familiar to you? I am sure it does.
In weekends we can work. But even on those days, other priority takes its toll.
After completing five-day job, working for another two days (for self) looks impossible.
So what we can do?
Is there a way one can generate alternative source of income without killing self?
Yes, there is a way.
Start thinking about passive income.
#1. What is passive income?
Income generated by not getting actively involved in any work/job, is termed as passive income.
Examples of few passive income ideas in India are:
- Rental income,
- Dividend income,
- Interest income etc.
Apart from daily-involvement, there is also no effort necessary to generate passive income.
Yes, you heard me right.
Generation of passive income is also easy.
Looks like a dream, right?
No involvement, no effort…is this a scam?
No it is not a scam. It is real. But there is a bad side of it as well.
Passive income only drips slowly.
Sounds easy? It is not. Our psychology is not trained well to handle this money flow.
We have a habit of receiving money in a rush. How we earn money?
- Salary gets dumped into our savings account on a specific day.
- When we sell investment, lump sum amount gets unloaded in our bank account.
- At the end of the year, company pay us bonus. This also comes in heaps. 🙂
Did you see the point? Our mind is trained to handle money in bulk.
But Passive income comes in slow-slow drips.
It is much harder for us to manage passive income than we can imagine.
Let me give you a quick hint.
You have two alternative available in from of your for investment:
- Stocks : It can generate 15% p.a. return. But holding time is 5 years.
- Bank Deposit : It can generate “fixed income” from next month. But yield is only 6.5%.
You are more likely to choose which alternative?
Majority will pick stocks.
Not that stock picking is wrong, but when objective is to “Start” generating passive income, Bank Deposit can give a better beginning.
#2. Why passive income is not as popular?
Effective returns in the form of passive income range between 3-6%.
What is the average inflation in India? 6-7% per annum.
This means, return from passive income sources is too low.
Why people should think about passive income ideas at all?
There are two main reasons
- Passive income helps to save more money
- Only passive income can make one financially independent.
Sounds good? I am sure.
But again, the issue with passive income is, “it does not flow, it only drips”.
#3. Income drips from investment portfolio
The above picture is a typical representation of passive income ideas.
- Cylindrical tanks – represents investment portfolio.
- Drops – represents the yield/returns.
The bigger will be the size of investment portfolio, higher will be the yield.
This is rule number one.
Build your investment portfolio to generate passive income.
#3.1 The size and number matters…
What size? Which numbers?
The bigger will be the size of the asset, higher will be the passive income.
More will be the number of assets, higher will be the collective passive income.
Lets see a small example:
- Size: A 2BHK flat generates more rental income than a 1BHK flat.
- Number: 100 stocks can generate more dividend income than 5 stocks.
In the process of generating passive income, focus is slightly different.
Focus is more in creation of bigger portfolio, than on potential returns.
This is why here the size and number matters.
But is it not good, if potential returns are also high?
Sure, it will be an added benefit.
But people who are passionate about about passive income generation, their attention is on only one thing:
“Identify and collect assets which can generate regular passive income”.
Here emphasis is give more on such assets which generates “regular” passive income.
Example: Bank’s fixed deposit can start generating interest income from next month of investment.
This is why, though equity investors do not like bank deposits, but passive income lovers prefer bank deposit.
Equity investors wants growth.
Passive income investors wants regular income.
So to generate higher regular income, what people can do?
- Accumulate more income generating assets.
- Accumulate bigger income generating assets.
#4. Who likes passive income?
Person who would like to retire early from job, likes passive income.
Person who wants to become financially independent, likes passive income.
Passive income ideas are like a blessing for such people.
But everyone wants to retire early, and lead a financially independent life.
So does it mean that passive income ideas is for everybody?
Yes sure. It is for everyone who wants to keep control of life (money matters) in their own hands.
But before adopting passive income two points of caution again:
- Passive income is not like a lottery.
- Passive income will big a tsunami of money in your life.
Instead, passive income will begin with a light drizzle.
This slow, pleasant drizzling will continue till eternity.
Unless you cut the source, passive income drizzling will keep happening.
To really like passive income, it is necessary to understand this aspect of it very well.
#4.1 How to start?
Give yourself a target.
The target can be like, “generate your first passive income of Rs.1 in next 30 days”.
Yes, I am talking about Rs.1. Is it too small?
But this first Rs.1 will teach you a lot about passive income generation.
Generating even Rs.1 as passive income (consistently) is not easy.
So the point is, start slow.
Give yourself the breathing space. First deliberate and then buy your first asset.
Henceforth, keep buying assets which generates regular passive income
This should be the mind-set during the starting phase.
#5. List of 10+ Passive Income Ideas in India:
In this article we will discuss few common ways of generating passive income in India.
These are such ideas which are already proven.
Each idea suggested in this article will guide you towards an asset.
Investing in these assets will start a stream of passive income.
Though the initial yield will be low, but it will eventually increase.
This is another beauty of these assets which generate passive income.
But for the moment, focus should be more on the size of investment portfolio.
This portfolio should be full of those assets which generate passive income.
#5.1) Residential Property > Rental Income
Rental income is the best form of passive income.
But problem is, property purchase requires high capital investment.
Nevertheless, it’s still worth it.
Depending on ones affordability, one can buy a residential property.
By putting this property on rent, passive income can be earned each month.
To generate passive income, a big lump-sum investment is always necessary? Not at all.
One need not buy a duplex bungalow of R.1 Crore.
If my affordability is only Rupee 5 lakhs, I will buy a property matching this limitation.
Important here is to start generating the first streams of passive income.
No matter how low is the investment amount, what an investor must focus is on its “yield”.
- Property value : Rs.5 Lakhs
- Rental yield @4% per annum.
- It means, it will earn Rs.1,666 per month (4% x 500000).
Rupee 1666 may look a small amount initially.
But suppose, in a period of next 10 years, one is able to 5 such properties.
In this case, the total passive income will be Rs.8,330 per month.
Moreover with time, the yield will also improve from 4% to say 7% per annum.
This will further boost the rental yield.
[P.Note: The rental income from a real estate property can increase at the rate of inflation.]
#5.2 Website / Blog > Advertising Income
A good website / blog can start generating passive income within few days.
Establishing ones domain authority is key.
If one is blogging on topics of money management, then he/she must establish self as an expert.
The more will be the readers of the blog, better will be the traffic.
High traffic will surely translate into better income.
Such high traffic blogs can be monetised using the following options:
- Amazon Affiliate,
- Google Adsense etc
Advertisements on blogs is like referral marketing. By being a referral marketer, one can earn passive income.
Though one of the big limitation of passive income generation from blogs is the domain authority.
Establishing oneself as an expert is not so easy. It takes time to get built.
Till then, the income can be low.
Key indicators of domain authority are:
- Email subscribers
- Facebook followers Twitter followers.
Quality content and consistent work will be rewarded for sure.
There are people who easily earn $1,000 each month from their blogs.
#5.3 Photos > Royalty income after sale
These days many people have digital SLR Cameras.
One can use their camera to generate passive income.
There are two websites that can monetize high quality photos.
- iStock and
Click quality photos & upload them on these websites.
Anything can be uploaded on these websites.
But what photos one can click so that it can be monetised?
- Travel photos are most popular.
- Food photos are also liked.
- Photos of unique people.
- Car photos..etc
Go on clicking photos of all sorts of activities and then load them on these websites.
The only limitation of these websites is quality of photos should be high.
An amateur photographer can also click good photo and upload.
It makes no difference to these websites. Till the photos are attracting viewers, they will be happy to share their earnings with the photographer.
If the photos are unique and interesting it will attract traffic.
This way both parties earn money.
#5.4 E-book > Royalty income after sale
A writer can write a decent E-book and publish it online.
This is a great way to earning royalty income.
Sure, it’s not easy to write book. So this suggestion is valid for those elite people who can write.
Publishing, and marketing an E-book is also a challenge.
But generally a good book generally attract many eyeballs.
It is not easy to keep a well written book hidden for a long time. It eventually gets is due share.
After writing, marketing ones book is the toughest part.
But in this world of internet one can conveniently market and sell E-books.
Online writers are no longer dependent on a publishing agency.
Websites like Amazon and eBay, FlipKart etc can help one sell their E-books online.
I know about bloggers who wrote e-books on their subject and sold it handsomely.
#5.5) Stocks > Dividend Income
Dividend earning from stocks is like rental income from properties. Both are equally desirable.
Like real estate property yields rent, stocks yield dividends.
If location & quality of property is good, it will yield good passive income.
Similarly, if a company is mature and established, it will pay good dividends.
In both the case (property & stocks), purchase should be made at undervalued price levels.
At overvalued price levels the generated passive income yield will be too low. This demotivates the passive income enthusiasts.
To earn high dividends, one must focus on buying good stocks at undervalued price levels.
Blue chip stocks bought at undervalued price levels will yield high and consistent dividend income.
For me, dividend income is one of the best form of passive income.
More dividend stocks one has in portfolio, higher will be the passive income earned.
#5.6) Commercial Property > Rental Income
There is a slight difference between owning a commercial and residential property.
Everything is same except the taxation part.
Income from commercial property is considered as business income.
In this case, the tax liability can be much lesser (Total Rent – Total Expenses).
Hence investing is a commercial real estate property is more profitable.
# 5.7) Bank Deposits > Interest Income
If one cannot think of anything, bank deposits can generate passive income instantly.
There are two type of deposits:
- Bank deposits and
- Company deposits.
Bank deposits can be created from comfort of home.
These days most of the banks offer online FD facility. So one need not visit the branch.
Deposits starting from Rs 5000 to Rupee in Crores can be availed.
The interest generated from this deposited fund is the passive income.
Investor can select the option of interest payments as Monthly or on maturity.
Company deposits also yields interest but in this case, the interest income will not be paid on monthly basis.
#5.8) Dividend Mutual Funds > Dividend
Like stocks, mutual fund also pay dividends to its investors.
It is possible to get a credit of dividend directly to investors bank account.
Investing in dividend yielding mutual fund is better than direct stocks?
Not necessarily. But in case of mutual funds, the skill of the fund manager to generate income is become a key.
This generated income is distributed among investors as dividends.
Dividend yield from mutual funds are often higher compared to stocks.
Unlike stocks, mutual funds are rated by CRISIL. High rated dividend funds are better for investing.
Unfortunately no such credible feedback is available about individual stocks.
#5.9 OLX/QUIKR – income from sale
USA has Craigslist since years.
In India, OLX & Quikr was launched in last few years.
These are top online classified websites.
People use these portals to buy and sell their items & services online.
I myself have used OLX to sell my old DVD player, TV, mobile phone etc.
These items were such items which were junk for my house.
I cannot tell you how satisfying it is to get house cleaned and also earn money from it.
If this is not passive income what else is….
I have also heard of people who buy things from Craiglist and sell them back.
If one can buy a undervalued item, it can really be sold back with good profits.
#5.10 Freelancing job > income from service
Freelancing was a tough proposal till few years back.
It was not easy to locate freelance workers.
But with launch of freelancer.com, getting job and workforce is easy.
People post jobs, freelancers bid for the work.
Successful bidders get the project. On completion of project the freelancer get paid using paypal etc.
The kind of projects that one can get on freelancer.com are varied.
Software developers, content writers, proof readers, software testers etc type projects are available online.
If one has to be ones own boss, freelancing is one of the best options.
#5.11 Hub pages > Affiliate income
One can write articles online on hubpages and earn money.
If one does not want to go into the hassle of blog management, hubpages is the way out.
Hubpage is also a blogging platform but its completely free of cost.
Wordperss and Blogger is also free, but hubpage has its advantages.
One cannot post anything on hubpages.
The quality assessment of hubpages is very stringent.
Only quality articles are allowed to be featured.
It is possible to integrate Amazon, Ebay and Google Adsense ads on hubpages.
This way monetizing power of hubpages increases. Earnings on hubpages are paid to writers using paypal.
Disclaimer: All blog posts of getmoneyrich.com are for information only. No blog posts should be considered as an investment advice or as a recommendation. The user must self-analyse all securities before investing in one.