Investing in virtually risk-free assets such as brokered CDs, Treasuries, and money market funds is the best way to generate passive income without effort. Currently, these investments generate over 5% yield yearly, meaning you could generate over $5,000 with savings of $100,000. Investors have taken advantage of these generational high cash yields, fleeing to these virtually risk-free investments with high annual yields.
Requirements for Passive Income
Some questions to ask yourself regarding passive income include:
- Am I willing to put any capital at risk to earn more than I’m risking?
- Am I willing to spend significant extra time managing this passive income stream? Some side hustles require more time than others.
- Do I have to do marketing or sales to find clients or customers?
- Is there any physical or manual labor involved?
The most ideal passive income streams run on autopilot, with little need for constant monitoring or active involvement.
As a busy professional, you may not have the time or energy to dedicate extra money to actively managing your passive income hustle.
However, intelligent cash management is the most optimal way to generate passive income.
What is Intelligent Cash Management?
Intelligent cash management optimizes your cash to earn yield while maintaining liquidity to cover day-to-day expenses.
Most people park their cash in a checking or savings account to ensure they have enough money for daily expenses. This mistake can cost you hundreds of thousands of dollars in the long run. The biggest drawback with over-savings is that the cash is not “useful” while sitting there.
To intelligently manage your cash, seek out cash equivalents that offer a yield on your cash.
Here is a list of cash equivalents in no particular order:
- Treasury bills
- Commercial paper
- Money market funds
- Certificates of deposit
- Short-term government bonds
- Banker’s acceptances
- Repurchase agreements
- Short-term corporate bonds
- Cash on hand or in bank accounts
For most investors, a low-risk investment option such as brokered CDs, Treasuries, and money market funds can provide a guaranteed way to earn 5% while keeping your money government-insured.
We recommend investing in these cash equivalents as the most optimal to secure passive income with basically no extra effort,
Low to No-Risk Assets Are Your Best Bet To Make Passive Income
Why would someone invest their cash into cash equivalents instead of pursuing another side-hustle alternative, such as setting up an e-commerce store, doing real estate rentals, or another idea?
The key advantage of these investment options is the minimal time commitment required and close to zero effort. Once you have made your initial investment, you can sit back and let your money work for you. Cash investments like brokered CDs, Treasuries, and money market funds all pay stable and consistent yields.
For example, brokered CDs pay a guaranteed interest rate and offer a more diverse selection of maturities and interest rates than bank CDs. On the other hand, Treasuries are backed by the U.S. government and offer a safe haven for your money. Money market funds provide another option, offering a combination of low risk and potential returns by investing in a portfolio of short-term securities such as Treasury bills, certificates of deposit, and commercial paper.
Brokered CDs Offer Guaranteed Rates
You can make a guaranteed amount with brokered CDs offering the highest rates in a decade. Brokered CDs are an excellent alternative to cash for investors looking for a safe and reliable way to earn passive income. They allow you to manage all your investments from a single brokerage account, thus saving you even more time.
One of the main benefits of brokered CDs is their higher interest rates compared to traditional CDs. With some brokered CDs offering rates of 5.6%, you can maximize your returns and grow your investment faster. With $100k, you would make $5,600 from the interest alone!
In addition to higher rates, brokered CDs offer more flexibility than traditional CDs. You can choose from various terms and maturities to customize your investment strategy. This flexibility can help you align your investment with your financial goals and risk tolerance.
The U.S. Government Is Obligated to Pay You
With Treasuries, the U.S. Government must pay you the interest on the bond. Today, a 1-year Treasury bill will generate over 5%. With $100k, you would make $5,000 from the interest!
Treasury bills are backed by the full faith and credit of the U.S. government, making them one of the safest investments available. When you invest in Treasury bills, you essentially lend money to the government in exchange for regular interest payments.
One of the most significant advantages of investing in Treasury bills is their low-risk profile. Since they are backed by the government, the chances of default are near zero. This makes them an attractive option for investors who prioritize capital preservation.
Another advantage of Treasury bills is that they are highly liquid, meaning that investors can easily buy and sell them without incurring significant costs or experiencing delays. This liquidity makes treasury bills an attractive investment option for individuals and institutions looking for short-term, low-risk investments.
Furthermore, Treasury bills offer tax advantages. Unlike other forms of income, such as interest from savings accounts or stock dividends, the interest earned from Treasury bills is not subject to state or local taxes. T-Bills are also one of Warren Buffett’s favorite places to park Berkshire Hathaway’s cash.
Investing Is the Easiest Way to Make Passive Income
For busy professionals with $100k, investing in low to risk-free assets like brokered CDs or Treasuries is the best way for you to generate automatic passive income as a busy professional. By choosing these options, you can ensure a guaranteed return of 5% without taking on unnecessary risks by simply clicking a few buttons on your computer.
You can consider real estate investments, dividend stocks, peer-to-peer lending, index funds, and rental properties as alternative passive income opportunities if you have more time and capital.
However, while they may offer higher returns, they do not guarantee returns, unlike some of the cash equivalent products we mentioned with brokered CDs, Treasuries, and money market funds.
This is the easiest way to make annual passive income with a “set it and forget it” mindset, perfect for busy professionals who want to make money while they sleep!
