Wouldn’t it be great to have investments with monthly payouts that pay you a monthly income? Rather than this being a luxury, it’s becoming a necessity.
The amount of cash a retiree needs to live a comfortable life is tied directly to the Consumer index Price (CPI). According to CNBC, The CPI rose 5.4% from a year earlier, meaning the average American had to spend 5 dollars more on their purchases.
Since the cost of living is rising, you’re going to need investments that can keep up.
Ready to get started? Buckle up; we’re about to make some money.
Table of Contents
7 best investments with monthly payouts
1. Rental properties
Owning real estate is one of the most tried and true investments with monthly payouts. If you own a house, condo, or some other piece of real estate, you can rent it out to tenants in order to generate monthly income through rent.
There are pros and cons to this approach, however.
You don’t have to own the property outright
If you can get a loan to finance your rental property, and your rent is higher than your mortgage, you’re in the green every month.
The biggest downside is that, while you don’t need to own it outright, it does require you have a big down payment to buy the property in the first place.
Rental property income is reliable
If you can find long-term tenants, rental income is reliable and steady. Keep in mind though, that you have to take into account any costs of maintaining the house, like insurance and repairs.
The rental property biz can also be hands-off
Depending on where you live, you might not even need to do the work yourself.
You can turn over the tasks of collecting the rent and managing the unit to a management company and pay them a fee. This will reduce your profits but also reduce how much time you need to spend on the investment.
Your rental property is an asset
Another big pro is that this rental property is an asset that grows over time. This means you can always bail out, pull the ripcord, and get your down payment out (and then some).
2. Stocks that pay dividends
Stocks can be solid investments, but we’re talking about earning monthly payouts here. That’s where dividend stocks come in. Dividend stocks are a popular way of earning passive income from your investments.
What’s a dividend?
Most stock investments earn income in two ways: increased share prices and scheduled (sometimes monthly) dividend payouts. A dividend is an annual amount of money that the company gives to everyone who holds their stock.
They may be paid out quarterly, bi-annually, or annually.
When you choose stocks that pay a dividend, you are setting yourself up to earn a cash payment every month – just for owning the stock! The more shares you hold, the more monthly dividend income you will get.
How much can you make with dividends?
Currently, the average dividend payout for the S&P 500 stands at 1.5 % annually. Many ‘blue-chip stocks’ pay scheduled dividends to their investors. To diversify your portfolio, you can buy several individual dividend stock options to increase your monthly income from dividends.
Income from dividends may reduce when a company stops paying dividends, especially when it experiences financial troubles. Monthly income could also be affected when the share prices of your stocks plummet, affecting the net worth of your portfolio.
The risk of investing in dividend stocks
There is some risk with dividends, though. For example, the company can temporarily or permanently stop paying a dividend or decrease the amount of the dividend. Worse yet, the stock could go down as well.
You should never invest in a stock purely because of its dividend yield. Do your “due diligence” and only invest in companies you believe in.
3. Certificates of Deposit
Certificates of deposit, or CDs, are a type of low-risk investment vehicle. CDs allow you to invest your cash for a specific number of months.
How do CDs work?
You purchase them in intervals such as three months or one year. Over the course of that time period, you get your money back plus a small amount of interest in regular payments.
The longer the time period, the more interest you get.
CDs often offer the option of receiving monthly interest payments or a lump-sum payment at the end of the investment term. You should only invest cash you don’t need instant access to during the CD term to avoid penalties upon withdrawal before maturity.
Are CDs safe?
CDs are very safe. They are backed by the federal government, and you can also take your money out early, although this usually involves a fee. A CD is similar to a savings account but with a higher rate, and you cannot treat it like a bank account because of the fee for early withdrawal.
How popular are CDs?
With the crypto and stock market craze, you’d think nobody invests in CDs. Well, nothing could be further from the truth. In fact, just a few years ago, $154B landed in CDs in a single year.
Set up a CD ladder
To generate monthly income from CDs, you can buy several of them and then get paid back over time. This is called a CD ladder.
A CD ladder informs you on current interest rates and allows you to stagger your maturity dates, thus diversifying your interest yields.
They range in duration from a month to five years, and you can also mix and match the length you choose if you buy multiple ones.
4. Invest in bonds
Bonds are a great investment that pays out interest payments until the bond term matures.
What are bonds?
A bond is typically a loan you give a borrower, which you can then sell off in the secondary market to a fellow investor. Bonds typically come in two distinct forms: government bonds and corporate bonds.
What are the different types of bonds?
Government bonds include Treasury bills, bonds (long-term investment bonds), and municipal bonds. Government bonds are often accompanied by certain tax breaks/benefits for investors.
There are also bond mutual funds that help you blend together different kinds of bonds into one pool.
Are bonds risky?
Bonds are an investment that can pay you a monthly amount of money in a way similar to CDs. Bonds pay higher rates than CDs, but they also tend to be a bit riskier.
Are bonds a good investment?
Due to the low interest rates in the market, it has become increasingly difficult to get investors excited about bond index funds. However, if you want to disperse your risk, holding onto some long-term bonds will cushion your portfolio from market volatility.
What are bond ladders?
Some people like to create “bond ladders” which are overlapping sets of bonds that stretch over multiple sets of years so that you have different bonds paying you each month over time.
For example, if you buy five-year bonds every year, you will get an ongoing and overlapping set of payoffs.
4. High-Yield Savings Accounts
High-yield savings accounts are exactly what you think they are.
What are “high-yield” savings accounts?
High-yield savings accounts typically offer better interest yields than traditional saving accounts. This type of account also allows you to make penalty-free withdrawals.
Most high-yield saving accounts do not require an ongoing balance or a minimum deposit.
Any downsides to high-yield savings accounts?
Some of these accounts may have certain caveats, such as being online-only accounts and only permitting up to six monthly withdrawals.
However, the fact that they do not charge monthly service fees makes them attractive short-term investments to store your cash.
5. Money Market Funds
A money market fund is an interesting investment device.
What are money market funds?
It is like a mutual fund that works similarly to holding bonds or stocks that pay dividends because they have an interest rate.
For legal reasons, they must keep their asset value to $1 per share and all gains above that are given back to investors.
Are money market funds a good investment?
A money market fund can have higher or lower rates than a CD or bond fund depending on the market. They have some extra advantages.
They can be used like a bank account and often have a debit card, which means you can take money out or spend it at any time.
6. Real Estate Investment Trusts
Buying into a REIT allows you to get involved with real estate investing if you don’t have enough money or time to buy real estate for yourself.
What are REITs?
A real estate investment trust or REIT is a special investment fund that only invests in real estate.
When you invest in a REIT, it generates a monthly or annual return based on how well its real estate assets are performing. The rate is not known in advance the way it would be for CDs or money market funds.
Are REITs risky?
It does carry risk because the value of the REIT can go down if the assets decline in value. Most REITs have shares that can increase or decrease in value and those shares also carry a dividend.
By law, REITs have to pay out 90% of their income to investors, so they’re a great way to tap into a hot real estate market.
7. Peer to Peer financing
In recent years, a new form of investment has arrived– peer to peer lending and financing.
How does p2p financing work?
Websites such as SoFi and Prosper create a platform where individual people can make requests to borrow money from other individuals – peer-to-peer personal lending. Investors can choose who to lend money to based on information such as their credit history.
Investors can choose to fund multiple different loans with different amounts, duration, and interest rates, letting them customize their monthly income flow.
Are p2p loans risky?
The rates can be high, into the double digits, which can be good for investors like you. On the other hand, you also run the risk of the borrower not paying back the money.
8. Crowdfunded real estate
Crowdfunded real estate is a novel investment model in the real estate sector. This model means that instead of investing in real estate, investors act as hard-money lenders to would-be purchasers. They offer short-term, purchase-rehabilitate loans to flipper investors.
How does crowdfunded real estate work
Typically, the fund lends money to a flipper to purchase and renovate a piece of property, usually for commercial purposes. The fund then invites investors, like you and me, to pick which loan we would like to fund.
They then pay interest based on the risk value of the loan you chose to invest in.
Is crowdfunded real estate a good investment?
The beauty of this kind of investment is that the interest rates are not as variable as the stock market or REITs. Moreover, you do not have to manage the property as rental estate owners have to.
The interest rates are also higher depending on whether your investment has an equity or debt structure.
9. Business income
The prospect of starting a business is a daunting task to many. However, it is a sure way of ensuring you earn a consistent monthly income. With the rise of the online marketplace, starting a business has never been easier.
By starting a business, you can make other people’s time, money, and experience earn you money. The beauty of running a successful hands-off business is that you can continue earning even after you cease running the business’s day-to-day operations.
Want to turn this investment into one that earns you monthly payouts like clockwork? It comes down to hiring the right people to run the show.
It also helps to identify a universal problem and offer a unique solution that people are willing to pay for.
Alternatively, you can turn your favorite hobby into an income-generating engine that ensures you continue earning long after you stop working.
10. Royalty income
Earning income through royalties is an investment that has powerful potential for substantial monthly payouts.
Some of the richest people in the world depend on royalties to make money. For example, the king of pop himself made more money post-humously from royalty payments than he did when alive.
You too can make money from royalties by self-publishing a work of art or buying existing rights to an already published work. You can earn royalties from the following works of art:
- Educational material
- Movies and TV shows
- Songs and Music albums
You can purchase rights to royalties through various auctions. The downside is that these rights are expensive, and you might require hefty amounts of money to purchase the rights to certain works. It would be best if you also considered the time you’re willing to take to earn a profit from your investment.
What to know about investments with monthly payouts
I didn’t want you to leave without me first pointing out some (perhaps obvious) caveats to this whole thing first.
1. Investments carry risk
Each of these investments has a different risk profile and is dependent on different parts of the financial world to succeed.
It’s generally a good idea to diversify investments so you don’t have all of your eggs in one basket. That way, if one part of the market goes down, you can still hold assets connected to other parts of the market.
2. Research first before you invest anything
Building up a set of investments that pay you every month can take time and research. It’s not something you can pick up overnight.
3. It takes money to make money
I can’t ignore statins the obvious. It takes money to make money.
You need a sufficiently large amount of money to invest so that the ongoing monthly payments are big enough to pay you a monthly income every month.
The two types of investments
There are two ways to approach investing, the long-term and the short-term.
Long term investing
Long-term investing is squirreling your money away in a retirement account like a 401k or IRA. The benefit is that you get special tax advantages. The downside? You need to be old and gray to take advantage of those advantages.
Short term investing
Short-term investing, on the other hand, are investments that generate monthly payouts (passive income).
While you might not be able to replace your income right away, these investments are cash-flow investments that will put money in your pocket every month.
Investments with monthly payouts: The bottom line
The difference between the wealthy and other folks is that they have different viewpoints regarding money. For them, their money must work. When their money works for them, it frees up their time to engage in more fulfilling activities.
When you are busy slaving away at your 9 to 5 job, the wealthy are attending their kids’ recitals. They are teeing off for a round of golf or shopping at high-end boutiques and stores. All this time, their money is still working for them and generating income.
Having an alternative source of income has been proven as one of the ways to improve your quality of life.
According to The Business Journals, 41% of households in the country’s 1,000 richest communities earn passive income. This, compared to only 7% in the 1,000 least affluent communities, underscores the importance of passive monthly income.
I hope this has helped! Making investments that generate monthly payouts can start you down the path to financial independence. Thanks for reading and good luck.