Passive Income in Singapore: 10 Ways To Earn More Money 2023

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How to Earn Passive Income in Singapore (2023): 10 Ways

To achieve financial freedom in Singapore you’ll need USD 3.23 million or approximately S$4.33 million, according to the article published on SCMP , This may seem like a tall order and could be overwhelming when you’re estimating the amount of passive income you’ll need. But don’t be discouraged!

The truth is, the amount of passive income you need will depend on your lifestyle. Here are a few things you need to consider:

For instance, if you plan to travel overseas frequently, then you’ll need to generate a higher passive income stream to pay for those expenses.

10 Ways To Earn Passive Income in Singapore

1. Buy Stocks

If you’re thinking of dipping your toes into passive income investing, then generating money off the stock market is a good option.

Companies pay their stockholders dividends every year. That said, you can invest in dividend stocks that give out high dividends. However, dividend income is variable which means it can be cut depending on the company’s performance and other variables.

There are two types of stocks you can consider:

Consider investing in stocks with a high dividend yield of at least 4% returns.

Is there another way to generate passive income through dividend stocks?

You can also earn money by selling dividend stocks at a higher price than the amount you bought it. Since stock prices fluctuate, you’ll need to monitor the stock prices to determine the best time to buy or sell them.

2. Purchase High-Quality Bonds

If you’re looking for a relatively low-risk investment, then consider purchasing bonds. But what are bonds?

Bonds are typically used by governments and large corporations to finance their projects. That said, when you purchase a bond, you loan money to that company. In return, you’ll receive fixed interest payouts.

Once the bond reaches the maturity date, you can receive the interest payment. You can also sell the bonds to a third party if you don’t want to hold on to the bond.

What’s the Difference Between Stocks and Bonds?

This is completely different from buying stocks. When you buy stocks, you are exchanging your money for a small stake in the company. With bonds, you are lending your money to the company. Purchasing bonds is slightly less risky than buying stocks since you’ll be paid a fixed amount in interest.

3. Rent Out A Property Or Room

Do you have extra rooms in your home? You can earn rental income by leasing them out to long-term tenants. While rental income is one of the most straightforward ways to earn passive income, this type of investment requires time and effort.

Here are a few things to consider before renting out a property or room:

That said, rental properties take time to generate income. You have to consider your home loan payments, the cost of stamp duty, and home renovations or repairs. To earn a profit, your rental income must exceed your mortgage payments plus any home renovations.

4. Invest via Robo-Advisors

Not bold enough to invest in stocks and bonds? You can start diversifying your investment portfolio via Robo-Advisors.

Robo- what?

Robo-advisors are digital platforms that use automated, algorithm-based financial planning to help you create a diversified investment portfolio. These digital platforms have little to no human supervision.

So how does it work?

A typical robo advisor platform will ask you questions about your financial situation and future goals via an online survey. The data gathered from this survey will help the platform determine your risk appetite. Once that’s done, the platform will offer advice and provide you with the best investment solution.

What portfolios should I consider?

If you’re looking for passive income, you may consider StashAway ‘s Income Portfolio. This portfolio pays out dividends based on the distribution of its underlying ETFs. The projected total payout every year is 3.75%.

Another option you can consider is OCBC’s RoboInvest which has a mix of 33 portfolios across 6 markets. These portfolios offer capital gains that are dividend-yielding. To get started, you need to deposit S$100.

This investment option not only offers lower fees than a traditional financial advisor, but the support is also available 24/7.

5. Invest In Exchange Traded Funds (ETFs)

Don’t have time to study individual stocks in the stock market? Investing in Exchange Traded Funds (ETFs) is a good option. But what are ETFs?

ETFs consist of a basket of securities, such as stocks, bonds, and commodities. Most ETFs track the market index, such as Straits Times Index (STI), as a whole, making it an excellent option for newbie investors looking for passive income streams.

And since it is a basket of securities, it is not as volatile as individual stocks and is easier to manage for those with busy lifestyles.

So how do you get started?

You can choose to invest in any fixed-income ETFs based on the market or sector you want. For instance, STI tracks the top 30 companies in Singapore. This includes DBS, CapitaLand, Singtel, and more. So instead of buying stocks individually, you can invest in a single product that is an STI ETF.

6. Buy Mutual Fund or Unit Trusts

Mutual funds , also called unit trusts, are a kind of investment wherein your money is pooled with other investors, allowing you to benefit from a diversified portfolio. Mutual funds are professionally managed by a fund manager who will then invest in a diversified portfolio of investment assets, such as stocks, bonds, or other types.

If you were to invest in these assets alone, you’ll be shelling a larger capital since you’ll be buying the assets individually. Plus, you’ll have to manage them on your own which can take a lot of time.

What types of mutual funds can you buy? Some of the most common mutual funds are:

The downside of buying mutual funds is the high fees and potential mismanagement. That said, choose a reliable and reputable fund manager and buy only from a regulated trading platform .

7. Contribute To CPF Life

CPF Life is one of the best annuity plans that every Singaporean has. Although it’s not something that comes to mind when you think of passive income, CPF Life still plays a huge role in creating a comfortable retirement lifestyle.

The Basic Retirement Sum for those turning 55 this 2022 is S$96,000. According to The Straits Times , the 3.5% increase, you can expect the sum to be $99,400 in 2023, $102,900 in 2024, $106,500 in 2025, $110,200 in 2026, and $114,100 in 2027.

Unlike private annuity plans where there’s a risk of non-continuity or non-guaranteed portion of the payouts, CPF life payouts are guaranteed by the Singapore government.

8. Invest in Real Estate Investment Trusts (REITs)

If you’re interested in property investments, then learn more on how to invest in REITs .

REITs are funds that allow investors to access a portfolio of income-generating estate assets in Singapore, such as shopping malls, offices, hotels, and industrial properties. It pools together money from various investors to invest in a diversified portfolio of properties.

So how does it work?

The REIT leases out spaces within the property and will collect rent. This rental income will form the yield that will be distributed to shareholders as dividends. REITs are required to distribute 90% of their taxable income per year to their shareholders. That said, they are known to have high dividend yields of 4% to 8%.

9. Purchase an Annuity Plan

Aside from building your passive investment portfolio, you can also consider purchasing an annuity plan. Annuity plans are a type of retirement plan that provides monthly payouts during your retirement years.

One of the best-known annuity plans in Singapore is CPF Life. However, you can also purchase annuity plans from insurance companies. When you purchase a plan, you can choose to pay a single premium or pay a fixed premium over a specified period. This will help you achieve financial independence in your golden years.

Once you’ve reached the retirement age, you will start receiving payouts for the number of years stated in the plan. Some annuity plans offer lifetime payouts.

Even if you already contribute to CPF, you can still set aside money to pay for the premiums of a private annuity plan. In doing so, you will enjoy higher payouts during your retirement years.

10. Invest In Singapore Savings Bonds (SSBs)

One of the safest bonds you can consider is the Singapore Savings Bond . These bonds are backed by the most credible institution – the Singapore Government. The minimum investment amount per bond is S$500. Your capital is guaranteed and you can easily withdraw it at any time.

As an investment, SSBs have the following features:

For the 28 March 2022 SSB issuance , the interest rate is 1.91% if held to maturity (10 years). That said, if you invest S$1,000 and wait for the government bonds to mature to the full 10-year period, you’ll get S$193 in interest.

Tips for Building Your Passive Income Portfolio

Passive income investing means growing your money from your investments. Aside from putting your money away into a savings account and letting it earn interest over time, you can also look for investment opportunities. But every form of investment comes with risks.

Some risks are bigger than others, but it also comes with satisfying rewards. Here are a few things you need to know to start earning passive income in Singapore:

Closing

Passive investing doesn’t mean there’s no risk involved. Choosing your passive income investment will depend on your financial goals as well as your risk tolerance. That said, be wary of any investment portfolio that promises very high returns as it could be a scam.

Key Takeaways

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