Investment income is the income generated from things like cash, stocks, bonds, property and the like. The income generated is in the form of interest, rent or capital gains. Rather than go through them all here, below is an outline of the main types and links to companies that offer this service or further information. The links may not be suitable for all countries and it is not an exhaustive list so if you have any others you'd like us to add, then contact us.
Having cash and depositing it in an institution that will offer interest for this money is how you can generate income from cash. Typically this type of institution is a bank. A bank will pay a person interest for the cash they deposit, usually the more cash you deposit the higher the interest rate. Banks can pay this interest because they use the cash to lend to other customers and these customers pay a higher interest rate for being able to use this cash.
Contact your local bank for more information on cash investments.
Company or government issued bonds are a fixed interest type of investment. Effectively, a bond is a contract between two parties.
Companies or governments issue bonds because they need to borrow large amounts of money. They issue bonds and investors buy them (thereby giving the people who issued the bond money) and earning interest on the money lent. This means that at some point, the bond issuer has to pay back the money to the investors. Source: Wikipedia
Stocks and ETFs
Stocks - are units of ownership interest in a corporation or financial asset that provide for an equal distribution in any profits, if any are declared, in the form of dividends. Stock are also bought for capital gains, e.g. they are bought because the investor believes the company will go up in value and they can sell the stock at a higher price at some point in the future.
Exchange Traded Funds (ETFs) are funds that trade on a stock exchange, just like ordinary shares. They combine the investment advantages of a managed fund with the ease and cost-effectiveness of share trading.
In Australia, an online financial adviser looking at balance investments of ETFs, local and global shares, gold and bonds for low fees is Stockspot. We personally have money invested with them. As always seek advice from a professional to see if they are right for you, but if you do, use the promo code "JANELM3P" to get a discount on fees on the first $5000 of your portfolio for the first 12 months.
In the US and Australia there are new start-ups that are taking micro-investments (or spare change) and investing in stocks or managed funds. Examples are Acorns in the US or Raiz in Australia.
Buying a property to rent out to others or to hold in the hope it will go up in value (e.g. capital gains) is how investment income can be generated from property. Buying property is generally a bigger investment and most people have to borrow money to buy the property. If you are renting it out, you have to manage the tenants, ensure the rent is paid and that the property is maintained. Owning an investment property, you are still responsible for the upkeep and fees like strata fees, council rates, insurance etc.
There are services in Australia that can help provide the advice you need to build an investment property portfolio. Examples are CodeWealth and BInvested. There are similar companies in other countries.
A cryptocurrency (or crypto currency) is a digital asset designed to work as a medium of exchange that uses strong cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets. Source: Wikipedia
Whilst a relatively new form of currency, with the most known one being Bitcoin, there are a number of different cryptocurrencies that you can invest in. Like stocks, generally investors choose cryptocurrencies for a capital gain.
If you are interested in buying and selling cryptocurrencies, Coinbase is a cryptocurrency exchange based in San Francisco.