How to Build Multiple Streams of Income: Stocks, Real Estate, and More

Many of us dream of being millionaires to achieve our dreams of home ownership, caring for our families, retirement, travel, and much more. However, few understand the diversified approach required to achieve this financial milestone. According to a report from the IRS, the average millionaire has seven distinct sources of income. This diversified strategy not only builds wealth but also provides financial security against economic downturns.

The total net worth of these five entrepreneurs is $223 billion – they all believe in one company where you can lend money to companies at 7-9% APY.

Latest Startup Investment Opportunities:

The Power of Multiple Income Streams

Diversification is key to financial resilience. Just as a savvy investor spreads investments across various asset classes, a millionaire ensures income isn’t dependent on a single source. Relying solely on a 9-to-5 job can be risky; job loss can significantly impact financial stability. Conversely, multiple income streams provide a buffer, allowing one to weather financial setbacks more effectively.

The 7 Streams of Income

According to IRS data, millionaires typically have the following income streams:

1. Dividend income from stocks
2. Earned income from employment
3. Rental income from real estate
4. Royalty income from intellectual property
5. Capital gains from asset sales
6. Business profits
7. Interest from savings, bonds, or lending activities

While building all seven streams can take time, starting with the most accessible options can set you on the path to financial independence. Here, we highlight three income streams that are approachable for the average person.

Dividend Income from Stocks

Investing in dividend-paying stocks is a straightforward way to generate passive income. You can build your own portfolio of high-yielding dividend stocks if you are a market enthusiast or rely on an exchange-traded fund (ETF) to do some of the heavy lifting for you.

One promising option is the Vanguard High Dividend Yield ETF (VYM). This ETF has a low expense ratio of 0.06% and focuses on high-yielding dividend stocks, offering a current yield of about 3.2%. Over the past five years, VYM has delivered an annualized return of approximately 10%. A $10,000 investment in VYM would yield around $320 per year in dividends, providing a solid foundation for building wealth over time.

Calculation for Becoming a Millionaire

Using VYM as a model, let’s calculate how long it would take to reach $1 million starting with $50,000 and contributing $500 monthly, assuming a 10% annual growth rate and a steady 3.2% dividend yield.

Rental Income from Real Estate

Real estate remains a popular way to generate income, thanks to rental payments and property appreciation. However, the upfront cost can be prohibitive. Fractional real estate platforms like Arrived Homes make it easier than ever by allowing investors to buy shares of real estate portfolios for as little as $100 without worrying about the hassles that direct landlords face. Returns on these platforms vary, and it’s essential to research the platform, where the properties are, and all fees involved before investing. 

Investor alert: Triple-net properties can put a check in your pocket every quarter—a can’t-miss opportunity for accredited investors.

Interest Income

Although interest rates may change soon, there may still be time to lock in high yields. Bond ETFs, like the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD), offer a way to generate steady interest income. LQD has a yield of approximately 3.5% and focuses on investment-grade corporate bonds, providing a balance of income and capital preservation.

Final Thoughts

Building multiple income streams takes time and effort, but financial security, wealth accumulation, and peace of mind make it worthwhile. Start with accessible options like dividend stocks, real estate platforms, and bond ETFs to begin diversifying your income sources. Over time, you can expand into more streams and work towards financial independence and wealth. The key is consistency and not getting panicked if the markets take a sudden downturn. 

Conclusion

Diversifying income streams is a tried-and-true strategy for achieving financial security and building wealth. You can build a solid foundation by investing in dividend-paying stocks using an ETF like VYM, exploring real estate opportunities through fractional real estate platforms like Arrived Homes, and leveraging bond ETFs such as LQD. With patience and strategic investments, reaching millionaire status is within your grasp.

Disclosure: This story was previously published on Benzinga and has been updated.

Looking For Higher-Yield Opportunities?

The current high-interest-rate environment has created an incredible opportunity for income-seeking investors to earn massive yields, but not through dividend stocks… Certain private market real estate investments are giving retail investors the opportunity to capitalize on these high-yield opportunities and Benzinga has identified some of the most attractive options for you to consider. 

For instance, the Ascent Income Fund from EquityMultiple targets stable income from senior commercial real estate debt positions and has a historical distribution yield of 12.1% backed by real assets. With payment priority and flexible liquidity options, the Ascent Income Fund is a cornerstone investment vehicle for income-focused investors. First-time investors with EquityMultiple can now invest in the Ascent Income Fund with a reduced minimum of just $5,000.

Don't miss out on this opportunity to take advantage of high-yield investments while rates are high. Check out Benzinga's favorite high-yield offerings. 

© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.