the quickest way to start making passive income today is by investing and contrary to popular belief it doesn't take a ton of money to do it in this video I'm gonna share with you five ways to invest $1,000 so that you can start collecting dividends profits and interest in your sleep building a passive income stream takes one of two things it takes time or it takes money and frankly the second option is a lot easier than the first and you can get started with as little as $1,000 what is up everyone I'm rose and welcome back to my channel the number one place for financial education empowerment and inspiration today I want to talk to you about passive income passive income is true freedom it's everybody's dream in fact it's the one thing that differentiates wealthy people from non wealthy people I first started realizing the importance of passive income in my mid-20s when I wanted to leave my job at the time and I thought how great it would be if I could just quit my job but still collect a paycheck I know as if right that's the thing with income that you actively have to earn such as a paycheck when you stopped working the money stops coming in there's just no way around it that's why over the last few years I've been very passionate about building passive income streams everything from starting a business to real estate to options trading to investing and what I'm realizing is that there is no such thing as an easy way to earn passive income if you ever see an ad where someone's trying to sell you on some sort of magical program that's gonna teach you how to make ten thousand dollars of passive income with no money and no effort it's a total scam you know that's not how life works otherwise everybody would be doing it you either have to put in your time or you have to put in your money if you put in your time you could maybe start a business or start a YouTube channel and these are all things that could turn into huge passive income streams but I guarantee you'll have to put a ton of time into it the quickest way to start making passive income today is by investing contrary to popular belief it doesn't take a ton of money to do it the first way to start making passive income with $1000 is to invest it in a REIT or a real estate investment trust when you buy a REIT you become a shareholder of a company that owns income-producing real estate a REIT is basically a stock but its stock in a company whose business is specifically owning and operating real estate REITs are legally required to pay out ninety percent of its income to you in the form of shareholder dividends and because the value of real estate also tends to go up over time owning a wreath can give you a nice combination of passive income and long-term capital appreciation compared to making a down payment and buying a property investing in a REIT is a much less capital intensive way to own real estate and there are many REITs out there that you can buy with less than $1000 for example this PG Simon Property Group is one very well-known REIT that owns shopping malls and retail property throughout the United States if you look it up on Google you can see that SPG right now pays a dividend yield of 5. 8 two percent that means that if you buy one thousand dollars worth of SPG right now you'll get fifty eight dollars and twenty cents deposited to your account every year in reality dividends are actually paid quarterly usually so you'll get fifty eight twenty divided over four quarters which is about fourteen dollars and 55 cents every three months now I know that fifty eight dollars and twenty cents of passive income a year isn't exactly life-changing but you have to keep in mind that the vast majority of people don't make any passive income at all like not even a single cent and I don't know about you but 58 dollars and 20 cents is a lot better than zero passive income back when I bought my first stock ever as a teenager I had no idea what I was doing but getting my first dividend payment was a really powerful experience I'm pretty sure it was just a couple of cents but still getting your first dividend payment is a feeling that you never forget once you make passive income a part of your identity no matter how small that first payment is you can always increase the amount that you invest and just keep growing your dividend streams from there that being said there is one passive income investment I want to tell you about where I made my $1,000 back in just one month and continued to make passive income off of that so stay tuned for that story because it's coming up soon okay and the next passive income investment idea that I have for you is to invest in a municipal bond fund first of all what is a municipal bond municipal bonds are loans that you make to local governments in order to help them fund public projects like building new schools hospitals and highways what's awesome about municipal bonds is that they're generally quite safe because it's a bond and bonds are known to be safer than stocks and they are tax-free that means that any interest payments you receive as a municipal bond investor is gonna be 100% free of federal taxes and if you're a resident of the state that issues the bond that you bought it's also gonna be free of state and city taxes if you live in an expensive city like New York City where federal state and city taxes combined can go as high as 40 percent total municipal bonds is a pretty sweet deal to invest in municipal bonds you can buy them individually or you can buy a bunch of them packaged together as a municipal bond fund I like the bond fund option better because if you get unlucky and you pick the wrong bond if you were to go the individual bond route then there's always a risk that the borrower won't be able to pay you back investing in a municipal bond fund eliminates this risk because your investment will be diversified across many different borrowers if you live in NYC one municipal bond fund that pays a nice yield is the Blackrock New York municipal ops fund or ma MKX at the moment this fund yields 1. 7 3% that doesn't sound like a lot but this is 1.
73 percent of tax-free income that means that if your total tax rate is 40 percent you would need to find investments that yield at least 2. 8 to get the same after-tax income as this new york city municipal bond fund so if you're looking for a super safe way to make passive income with $1000 investing in municipal bond funds can put up to 17 dollars and 30 cents of tax-free income in your pocket every year or at least that's the case with this bond fund the third way to start investing for passive income with $1000 is to buy dividend stocks this is gonna probably yield a little more passive income than the previous municipal bond fund option but of course buying dividend stocks come with their pros and cons one example of a dividend stock right now is gracie's which at the moment pays a dividend yield of nine point nine five percent that's almost 10 percent pretty high that means that with $1,000 worth of Macy's stock you can collect almost $100 in dividends just for owning that stock of course the catch is that there's always investment risk with dividend stocks unlike bonds where you're collecting interest and then you're essentially contractually guaranteed the return of your principal back with dividend stocks you'll get those dividends but if the company goes bankrupt or just you know goes under you're not gonna get your original investment back so there's a lot of companies out there that pay quarterly dividends so on the outside they give the appearance of being financially stable but if you dig a little deeper into their books you may find that the company is actually struggling sometimes companies like these would be better off not paying dividends at all and instead reinvesting it back into the business I looked into Macy's a little bit to see what's going on there and just with a quick glance I can tell that even though they're paying a high dividend at a almost ten percent dividend yield I can tell that this company is in trouble over the last few years you can see that Macy's revenue has been declining steadily so it's a downward trend and normally that's not a problem in and of itself because the company can always also reduce its expenses so declining revenue is accompanied with declining expenses then the company essentially remains in the same position as before profit wise but what we can see here is that Macy's operating margin in other words its profit margin has also been steadily declining what this tells me is that Macy's revenue is going down but its expenses are not going down they're staying constant and after doing a little digging I realized that Macy's is locked into a lot of long-term leases at those major shopping mall locations so they're basically locked into high fixed costs even though their sales are falling it doesn't take a genius to realize that that is gonna be a problem so that just goes to show Macy's is an example of a high dividend stock that isn't necessarily a good idea to invest in because if the company is in trouble you'll get the dividends but again you might not get your principle back so while I love dividend stocks I don't recommend buying stocks just to get its dividend you should always do your own research on the company to make sure that it has good financials and then it's actually a good stock to own for example Apple is a company that pays a really good dividend and it's quarterly and according to Warren Buffett because it's the top holding in his portfolio seems like a good stock to own so if you're going to dividend stock route you always want to buy quality stocks that also pay a good dividend of course looking for good stocks can be a lot of work and that is why this next passive income investment idea that I have for you might be a more attractive option my next idea for you is to invest in index funds the whole point of an index fund is to not have to do any of that work of researching individual companies like we were talking about with Macy's and you don't have to look at financial statements if you're a beginner at investing owning index funds is a safer way to collect dividends then owning individual stocks I've been investing in index funds for a couple years now and there is nothing that I love more than seeing those dividend payments roll in and what's cool about this is that I set it up so that my dividends get reinvested automatically rather than spending my dividends even though it is passive income I keep it all in my brokerage account and then I just used those dividends to buy more shares of the index funds this means that every month my dividend payments get bigger and bigger even though I'm not putting any additional money in because I'm accumulating more and more shares of my investments through dividend reinvestment right now an S&P 500 index fund yields about 1. 7 6% in dividends that means that on a $1000 investment you'll make $17.
60 per year in passive income again that isn't a life-changing amount of money but it's still $17.
