How to Make $500 a Month in Passive Income - SmartAsset (2024)

You can produce $500 a month in passive income through savings accounts, certificates of deposit, stocks, bonds, funds and other investment vehicles. Each offers varying rates of return, degrees of safety, convenience, and liquidity. And each requires a significant initial investment to produce the required amount of passive income.

A financial advisor will be able to help with your investment decisions.

How to Make $500 a Month in Passive Income

Passive income generally refers to money you receive automatically without having to do anything such as work for wages. The most common way to generate passive income is through purchasing investments that pay you interest or dividends.

Producing passive income in this way calls for putting in money rather than putting in the effort. However, once you have invested the money, you can cash checks or receive deposits to your bank account without any intervention on your part.

And there are many investments you can make to produce $500 monthly in passive income. Here are some of the most accessible and reliable:

Savings Account

A bank or credit union savings account is as passive, safe and convenient as you can get. Thetop-paying savings accounts yield around 4.5% annually. At that rate, depositing approximately $133,333 will give you $500 monthly.

Certificates of Deposit

Certificates of deposit(CDs) are relatively safe, somewhat better-paying and a little less convenient than savings accounts. The best one-year bank certificates of deposit yield about 5% annually. So if you buy a $120,000 12-month CD, you’ll get about $500 in passive income each and every month.

Bonds

Corporate bonds are riskier than bank deposits. But AAA-rated bonds are generally considered safe and historically yield a little over 4%. If you buy $125,000 worth of AA-rated bonds, you can expect to receive the equivalent of $500 a month. That usually comes in quarterly, semi-annual or annual payments.

Dividend-paying Stocks

Shares of public companies that split profits with shareholders by paying cash dividends yield between 2% and 6% a year. With that in mind, putting $250,000 into low-yielding dividend stocks or $83,333 into high-yielding shares will get your $500 a month. Although, most dividends are paid quarterly, semi-annually or annually.

Diversified Securities Portfolio

A diversified securities portfolioof 60% stocks and 40% bonds has returned about 6.1% annually on average for the last decade, according to Vanguard. If future performance matches past performance, which is not guaranteed, $100,000 invested in a well-chosen 60/40 portfolio could grow by about $6,000 a year. The return includes dividends as well as price appreciation, so you may have to sell some of your investments to get $500 a month.

Exchange-Traded Funds

Low in cost and easy to buy, passively managed exchange-traded funds (ETFs) produce returns that vary according to whether they track stock, bond or other indexes. To cite one example, Vanguard’s High Dividend Yield ETF yields approximately 3%. You’d need to invest approximately $167,000 to get $500 a month in passive income from that ETF.

Real Estate

Purchasing shares of a Real Estate Investment Trust (REIT) is one popular way to get passive income from real estate. Publicly traded REITS pay dividends at an average rate of about 3%. So you’d need $167,000 to produce $500 in monthly passive income this way.

Other income opportunities that are somewhat less passive can also provide regular monthly income with varying amounts of effort. Drop shipping, for example, is a business model that involves setting up an online store and taking orders for products that pass directly to a supplier, who fulfills them without you having to do a thing except accept payment.

Direct investments in real estate, such as purchasing rental properties, can produce income that the internal revenue service (IRS) views as passive income, entitling it to more favorable tax treatment than earned income from working. However, managing residential real estate can involve considerable effort and attention on your part unless you pay a management company to take care of leasing, repairs and other tasks.

Bottom Line

To generate $500 a month in passive income you may need to invest between $83,333 and $250,000, depending on the asset and investment type you select. In addition to yield, you’ll want to consider safety, liquidity and convenience when selecting the investments you’ll employ to provide monthly passive income. However, once you’ve made the decision and put down your money, you can expect to receive regular payments without much, if any, additional future effort.

Tips for Investing

  • Financial advisors help investors analyze various investment options and can help create a plan of action to meet their goals. Before investing in any passive income investments, consider talking with an advisor to understand how it fits within your portfolio.Finding a qualified financial advisor doesn’t have to be hard.SmartAsset’s free toolmatchesyou with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals,get started now.
  • When investing your money, it is important to diversify your assets among many different types of stocks and bonds. This helps you gain exposure to multiple sectors of the market and benefit from their growth. Ourasset allocation calculatorhelps you select a profile that’s right for you based on your answers to simple questions.

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How to Make $500 a Month in Passive Income - SmartAsset (2024)

FAQs

How to Make $500 a Month in Passive Income - SmartAsset? ›

You can produce $500 a month in passive income through savings accounts, certificates of deposit, stocks, bonds, funds and other investment vehicles. Each offers varying rates of return, degrees of safety, convenience, and liquidity.

How can I make $500 a month passive income? ›

Invest in Dividend Stocks

Investing a lump sum in stocks that pay high dividends can generate $500+ passive income per month. Do thorough research before investing. Reinvest dividends to compound earnings.

How much do I need invested to make $500 a month? ›

Some experts recommend withdrawing 4% each year from your retirement accounts. To generate $500 a month, you might need to build your investments to $150,000. Taking out 4% each year would amount to $6,000, which comes to $500 a month.

What is passive income according to the IRS? ›

Passive activities include trade or business activities in which you don't materially participate. You materially participate in an activity if you're involved in the operation of the activity on a regular, continuous, and substantial basis.

How to easily make $500 a month? ›

10 Ways To Make Extra Money: Earn $500 Per Month!
  1. Become a Pinterest virtual assistant (VA) ...
  2. Sell Printables. ...
  3. Start a dog bakery. ...
  4. Sell online courses. ...
  5. Dabble in dropshipping or print on demand. ...
  6. Rent out your space. ...
  7. Start a blog. ...
  8. Build a Fiverr account.
Mar 3, 2024

How to make $500 right now? ›

Make $500 Fast with a Side Hustle
  1. Become a Personal Grocery Shopper. If you're 18+ and want to make an extra $500 fast, then consider joining Instacart. ...
  2. Walk Dogs or Pet Sit. ...
  3. Make Money Through Social Media. ...
  4. Rent Out Your Space. ...
  5. Deliver Food. ...
  6. Start a Ridesharing Gig. ...
  7. Rent Out Your RV. ...
  8. Rent Out Your Car.

How much stock do I need to make $500 a month in dividends? ›

With a 10% yield and monthly payout schedule, you can get to $500 a month with only $60,000 invested. That is, $6,000 per year paid on a monthly basis. Unfortunately, most stocks don't have yields anywhere near 10%. Many do have high enough yields to get you to $500 a month with diligent savings, but don't pay monthly.

How to earn $500 a month in dividends? ›

That usually comes in quarterly, semi-annual or annual payments. Shares of public companies that split profits with shareholders by paying cash dividends yield between 2% and 6% a year. With that in mind, putting $250,000 into low-yielding dividend stocks or $83,333 into high-yielding shares will get your $500 a month.

How much money do I need to invest to get $1000 in return per month? ›

Reinvest Your Payments

The truth is that most investors won't have the money to generate $1,000 per month in dividends; not at first, anyway. Even if you find a market-beating series of investments that average 3% annual yield, you would still need $400,000 in up-front capital to hit your targets. And that's okay.

How can I make $100 a day passive income? ›

Some popular passive income strategies include investing in dividend-paying stocks, creating an online course, or writing an eBook. These methods require an initial investment of time and effort but can generate a daily return of $100 or more if executed correctly.

How can I make $30 a day passively? ›

Renting out a spare room on Airbnb is a great way to earn passive income.
  1. Online Surveys. Earning extra cash is easier than you think with online surveys. ...
  2. Freelance Writing. ...
  3. Virtual Assistance. ...
  4. Selling Handmade Crafts. ...
  5. Babysitting/Childcare Services. ...
  6. Renting Out a Room. ...
  7. Affiliate Marketing. ...
  8. Dog Walking/Pet Sitting.
Jan 11, 2024

What passive income is not taxed? ›

By keeping assets in tax-deferred accounts like IRAs and 401(k) plans, you won't have to pay tax on your income and gains until you withdraw the money from the account. In the case of a Roth IRA, you may never have to pay tax on your distributions at all.

What is passive income for dummies? ›

Passive income is revenue you get neither from your portfolio nor wages and does not require an ongoing effort. The term “passive income” is frequently used loosely for any revenues, including investment returns, that appear to require little or no effort by the one receiving it.

Is passive income ever taxed? ›

Generally speaking, passive income is taxed the same as active income. However, the exact tax treatment will depend on the exact source of your passive income and your financial situation as a whole. Let's take a look at three examples. Rental properties: Rental income is taxed the same way as regular income.

What is the simplest way to make passive income? ›

Passive income ideas:
  1. Create a course.
  2. Write an e-book.
  3. Rental income.
  4. Affiliate marketing.
  5. Flip retail products.
  6. Sell photography online.
  7. Buy crowdfunded real estate.
  8. Peer-to-peer lending.
Mar 27, 2024

How to realistically make $1,000 a month? ›

Fortunately, there are plenty of realistic and achievable ways to make an extra $1000 per month without sacrificing your current job.
  1. Freelancing. ...
  2. 2.1 Online Tutoring. ...
  3. 2.2 Writing and Editing. ...
  4. 2.3 Graphic Designing. ...
  5. Ridesharing. ...
  6. 3.1 Uber. ...
  7. 3.2 Lyft. ...
  8. 3.3 DoorDash.
Nov 11, 2023

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