income producing assets

9 Income Producing Assets to Include in Your Portfolio

Are you looking for ways to build wealth?

If so, the secret is through income producing assets. This will allow you to generate consistent and passive income streams well into the future.

So, if you want to learn how to make your money work for you, you’ll want to keep reading.

What are Income Producing Assets?

The first step is understanding exactly what income producing assets actually are. Simply put, they’re assets that allow you to generate a consistent flow of income. Each asset helps you diversify your income streams, allowing you to continue growing your monthly income beyond your traditional day job.

Some common income producing assets include real estate, dividend paying stocks, online businesses, and even savings accounts.

With inflation making everything cost more and wage growth struggling to catch up, more and more people are looking for an additional, steady income stream or two.

9 Best Income Producing Assets

As we examine some of the best income producing assets, we’ll start with those with minimal risk and gradually progress to riskier investments.

Certificate of Deposit

certificate of deposit can help you earn interest on your money.
certificate of deposit CD is shown on a conceptual business photo

One of the best low-risk investment options is a certificate of deposit (CD). These are very simple. You’ll loan a bank money for a specific period of time in exchange for a fixed interest rate.

For example, you might invest $10,000 into a 12-month CD that earns 3%. After the 12 months, you’ll receive your $10,000 investment back, plus $300 in interest.

Unfortunately, from 1960 to 2022, the average inflation rate in the United States was 3.8%. According to the FDIC, the average interest rate on a CD is between 0.23% and 1.86%. Most people might think CDs would be a bad investment because they would lose money to inflation.

That’s not exactly the case, though. You just need to know where to look. Many online banks offer interest rates well above 3.8%. For example, Sally Mae has CD rates approaching 5%.

High-Yield Savings Accounts

Another low-risk income producing asset is a high-yield savings account. Similar to a CD, you’ll earn a fixed interest rate on your money. Unlike traditional savings accounts at a brick-and-mortar bank, which pay very little interest, many online high-yield savings accounts offer an APY of 4% or more.

Even though you’ll earn less income with a savings account than you would with a higher-risk asset, they will help you diversify your investment portfolio.

Government Bonds

Investing in government bonds is similar to buying CDs; instead of lending money to the bank, you’re lending it to the government. The nice thing about these types of income generating assets is that you know exactly how much you’ll earn.

If you’re interested in bonds, you can also consider corporate bonds. These have significantly higher risks due to fluctuating creditworthiness from one company to the next, but they offer a significantly higher return. To mitigate the risk, you could invest in bond funds.

Real Estate Investment Trusts (REITs)

Moving on to some income producing assets with a little more risk are REITs. While investing in REITs comes with additional risk, they’ll also allow you to generate more substantial income than you’d get from CDs, savings accounts, or bonds.

Think about REITs the same way you would for mutual funds. Instead of investing in a single rental property, REITs allow you to invest in a portfolio of several properties, all managed by one company. The company uses the investor’s money to purchase and develop additional real estate assets.

REITs can be traded on a public exchange, similar to equities, or privately held. However, no matter what kind of REIT they are, the IRS requires them to pay out 90% of their taxable income each year as dividends.

Dividend Stocks

These income producing assets are going to allow you to generate passive income.
Candle stick chart, lines, numbers and percentage signs. Stock market, trading, equity, investment and financial figures concept. 3D illustration

A great passive income stream is to invest in dividend stocks. These companies pay out a portion of their profits to shareholders each quarter. This means you’ll not only earn income when the company’s stock price increases, but you’ll also generate income from dividend payouts.

Many dividend investors pay close attention to what’s known as Dividend Aristocrats. These are companies that have increased their dividend in each of the last 25 years. Such a feat is impressive, considering this includes significant periods of recession.

You can use Ziggma’s dividend tracker to monitor your investments and find additional dividend-paying stocks that can help you increase your passive income.

Peer-to-Peer Lending

With peer-to-peer lending, you act as a bank, lending money to other individuals. In exchange, the borrower pays back the principal and interest on the loan.

Many borrowers use peer-to-peer lending because they have low credit scores and would prefer to avoid the strict underwriting process that banks have.

If you choose to lend money through peer-to-peer lending sites like Lending Club, it’s important to understand the risk involved. Because of their lower credit scores, there is a chance the borrower will default on their loans. However, you’ll receive an attractive interest rate in exchange for that risk.

Rental Properties

Real estate is one of the best income producing assets available. However, many people feel it’s as simple as purchasing a house or a building, renting it out, and collecting rental income monthly.

Unfortunately, real estate investing is much more than that. You’re going to be 100% responsible for the buildings you own. This includes any maintenance and repairs needed. Plus, if a tenant chooses not to pay the rent, you’ll be responsible for tracking down the money or covering the monthly mortgage payment yourself.

You can pay a management company to handle most of this work, but that will cut your profit margin. Real estate investing is still a great way to earn passive income, both through appreciation of the building and through rental income.

Create an Online Business

Starting an online business is a great income-producing asset, and it’s available to anyone. The biggest obstacles for many people are the time and work involved.

Starting an online business requires you to understand that you will put in a lot of work creating a product or building up a customer base for a service without earning a lot of money immediately. But as the business starts to grow, the income potential is endless.

Not sure what kind of online business you could start? Think about your passions. What do you love to do that you know a lot about? Maybe it’s woodworking, or it could be computer programming. Take that knowledge and create a blog or develop an online course to teach others. You could even design a service that helps solve a problem.

No matter your online business, your potential customer base is large. After all, there are 5.35 billion internet users around the world.

Self-Storage Units

Investing in a self-storage unit has low overhead and a high return.
Corridor of self storage unit with yellow doors. Rental Storage Units

When most people think of real estate investing, they think of rental properties. However, there are other options available that require a lot less work but more capital. Self-storage units are a great example.

If you’ve ever rented a storage unit, you know how it works. You enter the building with a keypad, and there are seldom any employees on site unless maintenance is being done. Self-storage units have low overhead but high demand, especially in bigger cities.

The Bottom Line

Finding income producing assets is a great way to start earning passive income. Plus, because of increased prices and low wage growth, having additional sources of income is crucial for building wealth and being financially secure.

Frequently Asked Questions (FAQ)

What are examples of income producing assets?

Some common income producing assets include real estate investments, stocks, bonds, savings accounts, and anything else that generates cash flow.

What are the best cash flowing assets?

One of the best ways to generate cash flow is to start an online business. There is little overhead to get started, and these businesses are extremely scalable.

What is the easiest asset to buy?

Because it’s free to set up a brokerage account, investing in the stock market is one of the easiest ways to purchase income-generating assets.

What assets make the most millionaires?

The two biggest asset holdings for most millionaires are real estate and equities.

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