By definition, passive income doesn’t require much involvement on your part. However, there’s a catch. To generate a significant level of passive income typically requires a lot of work to accumulate enough money initially.
Let’s suppose that you’ve built up $1 million. That’s the threshold that many Americans view as the magic number needed to retire comfortably. And the number of retirement-plan millionaires is higher than ever. Even with that amount, though, you’ll probably find it more difficult than you’d like to generate enough passive income to maintain your standard of living.
But it’s not impossible to achieve your goal if you have $1 million saved up. Want $75,000 or more in passive income the easy way? Here’s where to invest.
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An underappreciated alternative
Three top ways of generating passive income are investing in real estate, bonds, or dividend stocks. Each option has some drawbacks, though.
Making money in real estate often requires more-active involvement than anticipated. With real estate prices soaring in recent years, there’s also the possibility that you could have to pay more than you’d like.
Generally speaking, bond yields aren’t very attractive right now. Stock dividend yields aren’t all that great, either, for the most part. For example, the average yield for the S&P 500 is only 1.3%. Your initial $1 million won’t make much passive income at that level.
However, there is an underappreciated alternative that can significantly boost your passive income. Closed-end funds (CEFs) are a special type of mutual funds that can be traded on a stock exchange like an exchange-traded fund (ETF).