In this uncertain financial climate, the ability to generate a steady cash flow is especially appreciated by seasoned investors.
That extra bit of liquidity gives you some room to maneuver depending on the market situation. Perhaps you might need some cash to pay off your loan installments or maybe you might want to some extra funds to reinvest when a buying opportunity arises.
You might even want to do some Christmas shopping with using that spare cash!
Regardless of which, cash is king for a good reason.
Here are the 3 most proven ways investors generate a regular cash flow for themselves:
1) Rent Out A House
Rental income is one of the most common methods for investors to create a positive cash flow for themselves.
Given the high rate of population growth in Singapore, it is not too difficult to find a tenant who is willing to pay $3000 a month for a rental unit with a decent location. Even after deducting the loan repayment, many can still find themselves with a positive cash flow.
This is the reason why so many Singaporean’s are trying to get an investment property, in addition to the house they are currently staying in. Even if you do not have an entire unit to rent out, you still can create another stream of cash flow by renting out one or two rooms.
Hot Tip: Smaller units normally tend to enjoy a higher rental yield than the larger units, but the latter than to experience higher capital gains.
2) Buy Dividend Stocks
Another easy way you can enjoy cash flow is to invest in stocks that pay out regular dividends. Counters such as Singtel, Starhub, Jardine and Singapore Exchange have been known to pay out dividend to their stock holders regularly like clockwork.
For example, Singtel have been paying out a dividend of about 4.5% annually to their stake holders. Even if you had invested a small sum of money with them (e.g. $10,000), you would have received an extra $450 every year.
That’s like getting a free vacation to Bali every year… without doing ANYTHING!
Hot Tip: Invest in stocks that have a long history of paying their shareholders dividends instead of stocks that currently have the highest dividend payout. Stocks with very high dividends payouts may not be sustainable in the long run.
3) Trade Options
One of the lesser known asset classes out there, options are actually very versatile as an investment instrument. Even Warren Buffett uses them to boost the returns on his portfolio!
Options have the characteristics of a stock which enables them to experience capital gains. However, they are also able to generate cash flow just like a rental unit!
Perhaps the greatest advantage options trading have got to offer to investors is the ability to start even with very small amounts of capital.
Compared to the previous two asset classes, trading options would definitely give you the most regularly from of cash flow. That is because you are able to generate cash flow from them quarterly, monthly or even weekly!
Hot Tip: Trading options can be quite tricky at the start. It is best to pick up an option trading course before you start.
Image Credits: cnbc.com