5 Passive Income Ideas in Singapore 2023: Earn more without working harder

This is an ideal income source, as you avoid needing to exchange more time and effort for more money with a second job.

Nonetheless, it is essential to address one common misconception about passive income: it does not mean that you can generate a secondary income without any effort on your part! While it may require less involvement compared to generating active income, you'll still need to put in some work to set up your passive income source.

For example, earning passive income through real estate requires knowing which properties to invest in, and how to manage rental homes to earn decent returns.

How to earn passive income in Singapore?

Looking to earn passive income? Here are some ideas to consider:

1. Investing in Savings Accounts

If you are a beginner in passive income looking for a low-risk option, you can start by putting your money into Savings Accounts to earn interest. Ideal for beginners like students and young adults who have just started working, Savings Accounts are a low-risk investment which requires little money to begin with.

Choose a High Interest Savings Account - which generally provides higher interest rates if you meet certain conditions like crediting your salary and spending on qualifying credit cards - to earn more interest on your money.

2. Investing in Bonds & Index Funds

Another example of a lower-risk investment for passive income beginners are Bonds and Index Funds.

When you invest in bonds, you "lend" your money to an organisation. In return, you receive regular payouts after a predetermined period (via coupon payments or dividends). Some bonds like Singapore Savings Bonds offer the benefit of guaranteed capital¹, which means the initial investment sum you committed is returned to you upon maturity in full.

With Index Funds, you put your money into a diversified pool of assets (which may include stocks, bonds, or both) tied to the performance of a market index (e.g. Straits Times Index). The performance of the fund determines how much passive income you get.

Bonds and Index Funds are a great low-risk option for beginners like students and young adults to generate passive income too, as they tend to be more stable. Despite the typically lower returns, they serve as a solid foundation for those looking to dip their toes into the world of passive income generation.

3. Investing in Dividend Stocks

Dividends are profits paid out to shareholders of a company. By investing in dividend stocks, you earn passive income through dividend payouts. They are typically paid quarterly or annually, based on how much profits the company is earning and its dividend policy.

However, it's essential to recognise that investing in dividend stocks carries certain risks, as the amount of passive income received depends on market conditions and the company's performance.

Changes in the economy and shifts in the company's financial health can influence the dividends you earn, potentially leading to variations in your passive income stream.

4. Investing in Real Estate

There are 2 ways to invest in real estate: Rental Income and Real Estate Investment Trusts (REITs).

Choosing to earn rental income requires you to invest money to purchase a property and rent it out. With this option, you will have to take on the responsibility of setting your own rental fees, liaising with tenants and resolving any possible maintenance issues which may arise (e.g. fixing a broken toilet bowl or faulty aircon).

On the other hand, investing in REITs requires comparatively less effort and capital because you’re putting your money into a diversified portfolio of income-generating real estate properties. You'll receive passive income through regular dividends payouts, which depends on the performance of your REITs.

You may also earn potential profits by selling REITs strategically at an opportune time when they are doing well, to earn the difference in buying and selling prices.

5. Investing in Savings Insurance Plans

This is a special way of earning passive income which provides both wealth accumulation AND insurance protection.

How do Savings Insurance Plans work? It's quite simple: you'll pay regular premiums for the selected plan. Besides the insurance protection it provides, the plan will accumulate cash value along the way. As you approach the end of the policy term, you become eligible to receive the accumulated cash value, helping you generate passive income for retirement or other goals.

No matter what financial goals you have, there are various plans available to fit your risk appetite and investment preferences. You can opt for capital-guaranteed plans, or plans that can be customised to your financial goals.

Types of Passive Income: A quick summary

Boost your finances with passive income

The extra money you earn from passive income can come in handy in case of any unexpected expenses, or provide additional funds to supplement your retirement planning.

You can consider building a diverse investment portfolio using a combination of the options above, to fit your personal financial goals. A good rule of thumb is to have about 6-12 months of emergency funds saved up before you start investing.

It is important to exercise prudence in your investment choices. Conduct thorough research to pick your investments carefully and be sure to only invest within your means. To make the most informed decisions about your investment portfolio, you can choose to seek the advice of professional Financial Consultants who are experts in the field. They can offer valuable insights tailored to your individual financial needs and goals, helping you to choose the most suitable plan for your circumstances.

Now that you have a better understanding of the various ways to earn passive income in Singapore, you're equipped to start growing your money with less effort. Take the first steps now to grow your wealth, and build greater financial security and peace of mind for the future!

Footnotes

1. Dollars and Sense
   https://dollarsandsense.sg/6-investments-singapore-provide-guaranteed-principal-returns/

Important Notes

These insurance products are underwritten by Manulife (Singapore) Pte. Ltd. (Reg. No. 198002116D). This advertisement has not been reviewed by the Monetary Authority of Singapore. Buying a life insurance policy is a long-term commitment. There may be high costs involved if you terminate the policy early, and your policy's surrender value (if any) may be zero or less than the total premiums paid.

This article is for your information only and does not consider your specific investment objectives, financial situation or needs. It is not a contract of insurance and is not intended as an offer or recommendation to purchase the plan. You can find the full terms and conditions, details, and exclusions for the mentioned insurance product(s) in the policy contract.

Your investments are subject to investment risks, and you may lose the principal amount invested. The performance of the ILP fund(s) is not guaranteed. The value of the units in the ILP fund(s) and the accumulated income (if any) may fall or rise. It is not a contract of insurance and is not intended as an offer or recommendation to purchase the plan. You can find the full terms and conditions, details, and exclusions for the mentioned insurance product(s) in the policy contract.

This policy is protected under the Policy Owners’ Protection Scheme which is administered by the Singapore Deposit Insurance Corporation (SDIC). Coverage for your policy is automatic and no further action is required from you. For more information on the types of benefits that are covered under the scheme as well as the limits of coverage, where applicable, please contact us or visit the LIA or SDIC websites (www.lia.org.sg or www.sdic.org.sg).

We recommend that you seek advice from a Manulife Financial Consultant or our Appointed Distributors before making a commitment to purchase a policy.

Information is correct as at 4 October 2023.