Imagine a day when you can sit back and just watch the money roll in. That’s the allure and promise of passive income investing.
Unlike growth or value investing, income investing focuses on generating income from your investments. While you may expect a regular payout from your passive income investments, you should not expect explosive growth. The intention is not to uncover an early Amazon or catch an Nvidia, which can bring you multi-bagger returns (and volatility).
Instead, the key to passive income is building it to a sufficient amount by continuously adding to it and reinvesting all returns until we accumulate enough to survive an entire year on the annual returns of our passive income investment.
Here are 10 popular ways you can generate passive income in Singapore.
Read Also: Guide To Dividend Investing In Singapore
#1 Dividend Stocks
Dividend stocks are one source of passive income available to all investors. However, it is more variable, as dividend payouts can be cut depending on the company’s performance and economic conditions.
Aside from blue-chip stocks that are known for their stable dividend yields, such as bank stocks, investors can also screen for listed stocks that pay high dividends. However, as stocks do not offer any capital protection or guarantees, investors should pay closer attention to the company’s fundamentals to assess whether dividends are paid sustainably.
You can invest in dividend stocks in Singapore and within global markets via a range of low-cost stock brokerage platforms, including IBKR, moomoo, POEMS, SAXO Capital Markets, Tiger Brokers, Webull and more.
#2 Real Estate Investment Trusts (REITs)
REITs are essentially property investments that allow investors to access property markets in Singapore and other major markets by pooling their money to invest in a diversified portfolio of properties.
As an asset class, REITs are required to distribute 90% of their earnings to their unitholders. This is why many REITs have a relatively high distribution yield.
Aside from investing in individual REITs on our own, investors can also choose to invest in multiple REITs through REITs ETFs, unit trusts or robo-advisory services such as Syfe REIT+. Syfe’s REIT+ allows us to invest in two REIT portfolios: 1) 100% REITs and 2) REITs with Risk Management (i.e. diversified with a bond portfolio). The 100% REIT portfolio offers a dividend yield of 5.91% and the REITs with Risk Management portfolio offers a dividend yield of 3.56%
If you prefer a managed approach to investing, Syfe offers portfolios for different objectives — from globally diversified Core portfolios and Equity100 for long-term growth, to REIT+ and Income+ for investors seeking income. You can also use its Cash+ solutions to put short-term funds to work while maintaining liquidity.
Find out more about the different Syfe portfolios and which may suit your financial goals.
Read Also: Complete Guide To Start Your REITs Investing Journey In Singapore
#3 Mutual Funds Or Unit Trusts
Mutual funds (sometimes known as unit trusts) are professionally managed investment funds that pool money from investors to buy securities, which can be any tradable financial asset (not just equities). Some mutual funds may be designed to track a particular index, while others are actively managed by fund managers to achieve a specific investment objective, such as beating market returns.
Depending on the fund manager’s focus, you can find mutual funds that focus on income investment and generate a strong regular payout through a mix of government securities, bonds, REITs and other fixed-income assets. Some may even include an equity component to increase the potential return.
However, watch out for fees. Some mutual funds charge high fees, which can eat into your returns, especially when compounded over time. You can invest in unit trusts via Endowus’ Fund Smart solution, where you can choose best-in-class and low-cost funds from the most renowned fund managers globally. For a single fund investment, Endowus charges 0.30%, while fees are up to 0.60% for multi-fund portfolios.
Read Also: Mutual Funds Or ETFs: Which Asset Class Should You Choose?
#4 Robo-Advisors
Robo-advisors are digital platforms that utilise automated solutions and algorithms to help us invest and manage our money. Like mutual funds and ETFs, robo-advisor platforms pool funds from many smaller investors to make large, diversified investments.
Currently, several robo-advisors offer products focused on income generation. Some notable options include StashAway’s Income Portfolio and Endowus Income Portfolios, which offer monthly payouts tailored to different income and growth needs. Of course, we’ve already discussed Syfe’s REIT+ as well.
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Read Also: Robo Advisors In Singapore (2024): What You Need To Know Before Investing
#5 Singapore Savings Bonds (SSBs)
The Singapore Savings Bonds (SSBs) are issued monthly by the Singapore government through the Monetary Authority of Singapore (MAS). There is a low minimum investment of $500, your capital is guaranteed, and you can easily withdraw it at any time. SSBs can be a good way to diversify your passive income sources.
For the May 2026 SSB issuance, the interest rate is 2.14% p.a. if held for the full 10-year period.
Read Also: Complete Guide To Buying Singapore Savings Bonds (SSB)
#6 Bonds
You can also invest in corporate bonds and bond ETFs for guaranteed principal and regular payouts. This makes bonds an attractive passive income investment. However, the “guaranteed principal” is still tied to the bond issuer’s ability to repay the debt. Some investors may recall high-profile bond default cases in Singapore in the past, where bondholders were unable to recover their interest or principal repayments.
Typically, corporate bonds have a higher coupon yield than government bonds and bank deposits. Most corporate bonds are traded on Over-The-Counter (OTC) markets. A small subset is traded on the exchange. These are also known as retail bonds. Popular ones include Temasek bonds and Astrea bonds.
Read Also: Step-By-Step Guide To Bond Investing In Singapore
#7 Fixed Income Exchange-Traded Funds (ETFs)
Fixed-income ETFs invest in a diversified basket of fixed-income assets, typically government securities and investment-grade corporate bonds.
As investors, we can choose to invest in various fixed-income ETFs based on the market or sector we want exposure to. Some of the fixed-income ETFs listed on SGX are traded in both the Singapore Dollar (SGD) and the US Dollar (USD), so investors have a choice of currency to invest in.
Currently, the ABF Singapore Bond Index Fund ETF, which invests in a basket of high-quality bonds issued primarily by the Singapore government and quasi-Singapore, has delivered an annual return of 2.47% since inception and a 5-year annualised return of 1.47% p.a. Meanwhile, the Amova SGD Investment Grade Corporate Bond ETF, which invests in investment-grade corporate bonds, has delivered a return of 3.0% p.a. since inception and a 5-year annualised return of 2.43%.
Read Also: How Fixed Income ETFs Can Help Protect Your Investment Portfolio In Singapore
#8 Real Estate/ Rental Income
A Singaporean investor’s favourite is rental income. Most Singaporeans think that owning a second property and renting it out is an assured way of getting income. However, it may not be as passive as we may think. Getting a steady stream of rental income requires skill and putting in the time and effort to find a good long-term tenant(s). Once we account for all the upkeep, administrative and maintenance work, this may be more effortful than we think. Outsourcing to an agent may be possible, but it would eat into our rental returns.
Apart from renting out an investment property, we can invest in real estate via MAS-licensed property investment platforms such as BigFundr and RealVantage today. BigFundr can give you exposure to guaranteed real estate-backed loans, while RealVantage provides access to fractional co-investments in properties.
Read Also: 5 Ways Singapore Investors Can Invest In Properties (Without Buying A Physical Property Yourself)
#9 CPF LIFE
CPF Life does not automatically pop into our mind when we think of passive income. However, CPF Life is a passive income investment that every Singaporean has (or will eventually have).
In essence, CPF LIFE is a government-mandated life annuity for all Singaporeans, providing a monthly payout (after age 65) for life. Depending on whether we choose the Basic, Standard or Escalating Plan, our payouts and eventual bequest will differ.
Based on the Full Retirement Sum (FRS) of $220,400 for those who turn 55 in 2024, we can expect a monthly payout of about $1,780 for life on the Standard Plan. Unlike private annuity plans, where there is a possible risk of the insurer defaulting or the non-guaranteed portion of the payouts falling short of expectations, CPF Life payouts are guaranteed by the government.
#10 Retirement Plans Or Annuities
A popular income investment product recommended by insurers, retirement plans or annuities offers an attractive mix of guaranteed returns, protection and even greater non-guaranteed returns. These products provide a regular payout during retirement. You pay for premiums, either through a single premium or regular premiums during your working years and receive payouts from a certain age.
The advantage private annuities have is their flexibility. You can structure these products to best fit your personal needs. Want an early retirement? It is possible to find a product that starts at 55, or even earlier. However, allocating a portion of the investment to protection can dilute future returns.
Understand the policy details before you commit to one of these plans. There is typically a high penalty for early termination. Here’s a detailed analysis of how to read a benefit illustration.
Read Also: Why You Should Maximise Your CPF LIFE Before Other Private Annuity Plans?
Passive Income Investing Does Not Equate To No Risk
Passive doesn’t mean no risk. Just like any other investment, the more risk you take, the higher your potential return could be. Thus, your choice of passive-income investment should depend on your risk tolerance. Be wary of any passive income investment that promises high returns; it could be a scam or be riskier than you think.
Read Also: Why Most People’s Idea Of “Earning Passive Income” is Actually To Start A Side Hustle
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