There are many types of investment vehicles that you can add to your portfolio to earn income from different assets. Diversifying your portfolio also helps you manage risk so that you’re not relying on a single asset like stocks or real estate.
You may consider investing in several of these ideas to have multiple income streams from traditional and alternative assets.
Many opportunities are easy to start since several platforms offer fractional investing, which lets you begin with a small portfolio balance.
Table of Contents
- Top Investment Vehicles
- How to Monitor Your Investments
Top Investment Vehicles
These investment vehicles have different income potentials, risk levels and liquidity. You may utilize several of these for short-term and long-term ways to earn passive income.
Note: These options are listed alphabetically. You should perform your due diligence before investing in any of these opportunities.
Investment-grade corporate and government bonds are one of the most common investment vehicles for investors with a conservative risk tolerance level.
This asset has less downside risk than stocks but offers significantly lower growth potential.
You can earn a fixed income from bonds through recurring dividends. There are several different ways to invest in bonds, including bond mutual funds in your retirement account or by purchasing small business bonds through Worthy Bonds.
Another option is buying U.S. Treasury bonds that earn a fixed yield until maturity. This yield can be higher than savings accounts with a variable interest rate.
While bonds are relatively low-risk, they are unlikely to beat the stock market long-term. Additionally, bond ETFs and mutual funds can have fluctuating share prices.
However, you may consider expanding your asset allocation as you approach retirement and need to shift away from high-risk assets that can quickly drop in value during a bear market.
2. Certificates of Deposit (CDs)
A bank certificate of deposit (CD) can be easier to purchase than individual bonds since the investment minimum is usually between $100 and $1,000. As a result, the yields are competitive and potentially higher.
You can build a CD ladder of short-term and long-term bonds to get exposure to different rates. This strategy can also help you have a higher interest rate for longer when future CD yields are lower than present.
Typically, CDs with a longer term have a higher yield as you commit your funds for a more substantial time period. However, you cannot redeem your deposit early unless you forfeit several months of interest income.
Another alternative is a no-penalty CD that you can request a redemption as soon as seven days after funding your account.
As a tradeoff, the yield of a no-penalty CD usually isn’t as high as term CDs, and the maturity date is typically 14 months or less.
Holding collectibles like sought-after games, shoes, watches and pop culture memorabilia can be lucrative investment vehicles.
Whether you acquire items from a bygone era or accumulate today’s most popular products, the item value can increase as they become rarer.
You can search for potential investments at local stores, Facebook Marketplace and eBay. Another option is buying fractional shares of blue-chip collectibles on Rally.
It’s best to start buying and flipping products you’re familiar with since you know what’s selling at a discount. You may decide to sell items right away to make a quick profit if you don’t want to wait several years in hopes the market value increases.
You may consider holding or trading cryptocurrency if you have a high risk tolerance. This asset class is relatively young and highly volatile, with many investment options.
Many crypto investors start with Bitcoin and Ethereum, which are the most established tokens and are less volatile than altcoins like Dogecoin, Cardano and XRP.
There usually isn’t a minimum investment since you can buy fractional shares of any coin from the best cryptocurrency exchanges. However, trading fees can apply for each buy or sell order.
In addition to buying the actual token, cryptocurrency-linked ETFs are available through many investment apps.
Plus, retirement plan providers are also starting to offer cryptocurrency as a portfolio option, which lets you avoid potential taxes on your gains.
Since the crypto industry lacks regulations like most publicly-traded securities, you may consider storing your private keys on a crypto wallet to safeguard against account breaches and exchange closures.
5. Exchange-Traded Funds (ETFs)
An exchange-traded fund (ETF) can be one of the more desirable investment vehicles compared to individual stocks since you can get exposure to multiple companies with a similar investment amount.
A single fund can hold less than one hundred to a few thousand positions.
An ETF can invest in these assets:
- Stock index funds (i.e., S&P 500 or the Russell 2000)
- Industry sectors (i.e., healthcare, tech, industrials)
- Bonds (corporate and government)
- Real estate
- Precious metals
The minimum investment can be the current cost of a single share. Additionally, many investing apps offer fractional investing with a minimum of either $1 or $5.
Earning dividend income from these funds is also possible when the underlying companies reward shareholders.
6. Fine Art
Investing in art has grown in popularity because this asset class has been resilient and even outperformed the stock market several times. You can have fractional ownership in works from well-known artists like Picasso, Monet or Andy Warhol.
Buying art investments can be pricey and difficult to store securely if you do it yourself. A platform like Masterworks does the heavy lifting for you since you can buy partial shares of classic and modern pieces.
The service also stores your investment for you.
One potential downside of being an art investor is that you will likely need to hold your position for several years before it’s possible to sell for a notable profit. Additionally, you won’t earn dividends while you wait to close your position.
Learn More: Masterworks Review: Invest in Art With as Little as $500
7. Fine Wine
Wine investments are another growing trend since you can purchase bottles from the world’s best vineyards. It’s possible to outperform the stock market and avoid the day-to-day volatility of stocks.
You can store your investment in a climate-controlled cellar for an average of 10 years and potentially longer to sell for maximum profit.
Similar to other physical assets, sourcing and safely storing your wine portfolio can be challenging to do by yourself. Instead, Vinovest offers curated portfolios with a minimum $1,000 investment and stores your bottles in cellars worldwide.
This investment idea doesn’t earn dividends. Instead, your income comes from selling your bottles at a higher price than your investment cost.
Learn More: Vinovest Review: Invest in Fine Wine
8. Health Savings Account (HSA)
A health savings account (HSA) is a tax-advantaged way to save for future medical-related costs for you and your family. It’s similar to a 529 college savings plan, but it’s for your health.
First, you receive an upfront tax deduction for the contribution amount. Next, you can make tax-free withdrawals when using your funds for most medical treatments and supplies.
You’re eligible to open an HSA if you have a high deductible health plan (HDHP) through your employer or a government-run health insurance exchange. Consider looking for HSA-eligible health plans during open enrollment.
There are several HSA providers with many similar investment options. A portion of your account balance will be interest-bearing accounts to cover short-term medical needs.
Then, you can invest your long-term assets into stocks and ETFs with more growth potential.
9. Individual Stocks
Setting aside a portion of your portfolio for dividend stocks or companies fitting a particular strategy, like energy stocks, are also one of the most popular investment vehicles.
Selecting single stocks instead of an ETF can also help you avoid companies that don’t align with your goals.
Individual stocks are easy to invest in as many online brokerages are commission-free and provide fractional shares.
You may also appreciate this asset class since you can hold stocks for as little as several hours or for multiple decades. In addition, it’s possible to make money from share price appreciation, and many companies award dividends.
There are also many stock research sites to compare your investment options, which can help you be more knowledgeable about the potential risks and rewards of purchasing certain stocks.
10. Money Market Accounts
A money market account can be an excellent alternative to high-yield savings accounts and bank CDs to park your short-term cash and earn a competitive interest rate.
Most accounts have a low or no minimum initial deposit requirement and no ongoing balance thresholds. This product is FDIC-insured for up to $250,000 and usually doesn’t charge account service fees.
Similar to a savings account, the interest rate is variable, and you can quickly transfer funds between short-term investments to chase a higher yield. As you earn a higher interest rate, you can make up to six withdrawals per month.
Your bank may also provide a debit card and checks to pay bills, but a free checking account remains a better option for this task.
11. Mutual Funds
Depending on your investment account type and brokerage, you might be able to invest in mutual funds. This offering is similar to an ETF as it invests in multiple stocks or bonds, but the share price only updates once a day after the market closes.
It’s common for mutual fund investors to build the 3-Fund Portfolio to get exposure to most stock and bond sectors. This investment strategy also has low fees and is easy to rebalance as your risk tolerance adjusts.
You may also consider a target-date retirement fund that holds stocks and bonds. It can have a low minimum investment and automatically becomes more conservative as retirement approaches.
There are also mutual funds that try to beat the stock market or its investment benchmark. However, these funds have a higher expense ratio as there is frequent portfolio rebalancing.
12. Precious Metals
Many investors like investing in gold and other precious metals, including silver, platinum and palladium, as an alternative to stocks, bonds and other alternative assets.
In particular, gold and silver are popular inflation hedges as they have been a store of value for thousands of years. People tend to buy precious metals when there is uncertainty in stocks or want to convert fiat currency into a physical asset.
To buy physical gold or silver, you can purchase coins or bars. Your cost is the metal’s current spot price plus the exchange premium.
The premium goes up when demand is high, which can make it harder to sell your asset for a profit as the spot price must increase more.
If you don’t want to store a physical asset, several precious metals ETFs are linked to the spot price. You won’t own the metal and most don’t earn dividends or royalties.
13. Real Estate
There are several avenues to invest in real estate.
- Crowdfunded real estate
- Real estate stocks and REITs
- Owning rental property
The investment minimum and management requirements for these investment vehicles differ by strategy. Stocks and REITs can offer the lowest minimum investments and holding periods but can be more volatile.
Real estate crowdfunding sites are growing in popularity since you can earn competitive returns on commercial and multifamily real estate without managing the property.
However, you must usually hold your shares for at least five years to avoid early redemption penalties.
Buying rental properties is the most expensive and time-consuming option since you’re responsible for maintenance and screening tenants.
14. Retirement Accounts
An individual or workplace retirement account lets you invest and only pay taxes once on the balance. Whether you pay taxes upfront or at withdrawal depends on the account type.
Your retirement plan options include:
- Traditional 401k, 403b, 457 and TSP: Initial contributions are tax-deductible, but you pay taxes on the withdrawal amount.
- Roth 401k, 403b, 457 and TSP: Initial contributions are tax-free at withdrawal, but any employer matching contributions are tax-deferred.
- Traditional IRA: Your contributions are tax-deductible but subject to taxes at withdrawal.
- Roth IRA: Your contributions grow tax-free and you can invest in stocks and bonds through your preferred individual brokerage.
- Self-Directed IRA: Invest in alternative investments and have either a traditional or Roth IRA tax treatment.
- Solo 401k: A retirement account similar to a traditional 401k for small business owners.
Each plan has different investment options, fees and contribution limits. IRAs tend to offer the most flexibility and lowest fees but have lower limits than employer-sponsored plans.
How to Monitor Your Investments
A net worth tracker can be the easiest way to track your investment performance and current portfolio value across multiple accounts and asset classes.
Several of these services are free, including Empower (previously Personal Capital), and offer additional financial planning tools.
For hands-on monitoring of stocks and funds, consider a portfolio analyzer. This will track your holdings, suggest changes to your asset allocation and offer model portfolios to manage risk.
Learn more: Empower Net Worth Tracker Review (formerly Personal Capital)
Owning multiple investment vehicles provides more ways to practice risk management and earn investment income. You may also be able to generate monthly income in addition to benefiting from appreciating asset prices.
In most cases, it’s possible to invest small amounts of money so that you can get exposure sooner while maintaining a diversified portfolio.