Which passive income stream is the best? – Top 10 + Pros and cons

Which passive income stream is the best? – Top 10 + Pros and cons
Photo by Carlos Muza / Unsplash

Which passive income stream is the best? Now that's a personal question. Without knowing your personal risk profile, I can't tell you definitely which is the best for you. I can, however, help you weigh the pros and cons of each.

In writing this, I am hoping to inspire you... and myself. Investing money is a game of Risk, yeah... like the old board game. You take a chance based off various inputs, and hope the odds play in your favor.

Return on investment (ROI), risk, stress and time requirement. Each of those play into the investments we make. The ideal scenario, obviously, would be high ROI, low risk, low stress, and low time requirement. Sadly, however, you generally can't align all four. Here's what I've found typically seems t boe the case when you look at each individually:

  • High ROI = High risk, high stress. Time requirement varies.
  • Low risk = Low ROI, low stress, and low time requirement.
  • Low stress = Low ROI, low risk. Time requirement varies.
  • Low time requirement = Low ROI, low risk, low stress.

Before choosing your first (or next) passive income stream, the most important thing to figure out is your risk profile and the amount of stress you can handle.

Top 10 passive income strategies

  1. Dividend Stocks: Invest in stocks of companies that pay regular dividends, allowing you to earn a share of the company's profits.
  2. Rental Properties: Purchase properties and earn rental income from tenants. Property management companies can help handle the day-to-day operations.
  3. Peer-to-Peer Lending: Use online platforms to lend money to individuals or businesses and earn interest on your investment.
  4. Real Estate Investment Trusts (REITs): Invest in publicly-traded REITs, which own and manage income-generating properties such as apartment buildings, office spaces, or shopping centers.
  5. High-Yield Savings Accounts: Earn interest on your savings by depositing funds into high-yield savings accounts offered by online banks.
  6. Royalties: Create and sell intellectual property such as books, music, or artwork, and earn royalties from sales or licensing agreements.
  7. Affiliate Marketing: Promote products or services through your website, blog, or social media and earn commissions for referring customers.
  8. Create an Online Course: Share your expertise and knowledge by creating and selling online courses through platforms like Udemy or Teachable.
  9. Digital Products: Develop and sell digital products like e-books, templates, software, or photography through online marketplaces.
  10. Index Funds: Invest in diversified index funds that track the performance of a specific market index, such as the S&P 500, allowing you to passively earn returns.

Passive income ROI

Determining the highest and lowest ROI for passive income streams can vary based on several factors, including market conditions and individual circumstances. However, here's a general assessment based on historical trends and risk-reward profiles:

Highest ROI potential

  1. Entrepreneurship and Business Ownership: Starting a successful business can provide significant returns, but it requires substantial effort, time, and capital investment.
  2. Stock Market Investments: Investing in individual stocks or high-growth sectors can yield substantial returns, but it carries higher risks and requires knowledge of the market.
  3. Real Estate Investments: Rental properties and real estate ventures can offer attractive returns through rental income, appreciation, and leveraging strategies.

Lowest ROI potential

  1. High-Yield Savings Accounts: While these accounts provide a safe and stable return, the interest rates are relatively low, making the ROI modest.
  2. Bonds and Fixed-Income Investments: Government or corporate bonds typically offer lower returns but are considered less risky than other investment options.


When it comes to risk, starting a business carries the highest risk due to the potential for failure, market competition, and financial uncertainties. On the other hand, high-yield savings accounts or government bonds have lower risk levels as they offer more stable returns and capital preservation.


Stress levels can differ depending on personal circumstances and preferences. Starting and running a business... you guessed it... can be considered one of the most stressful due to the responsibilities, uncertainties, and decision-making involved. Conversely, investing in index funds or dividend stocks may be less stressful as they rely on market performance and require fewer day-to-day management activities.

Time commitment

The amount of time required for each passive income stream can vary significantly. Once again, starting a business requires the most time investment, as it involves building and managing the entire enterprise. On the other hand, investing in stocks or REITs might require less time as it primarily involves research and periodic portfolio adjustments.

Initial capital investment

The amount of capital required can vary widely depending on the specific passive income stream and the scale of the investment.

Highest initial capital investment

  1. Real Estate Investments: Purchasing rental properties or commercial real estate often requires a substantial upfront investment. It includes costs such as property purchase, down payment, closing costs, renovations, and property management expenses.
  2. Entrepreneurship and Business Ownership: Starting a business typically requires significant capital for various aspects like product development, marketing, hiring employees, office or storefront setup, and operational costs.
  3. Franchise Ownership: Investing in a franchise business involves upfront fees, royalties, and initial setup costs, which can be substantial depending on the franchise brand.

Lowest initial capital investment

  1. High-Yield Savings Accounts: Opening a high-yield savings account generally has a low barrier to entry, with some accounts requiring minimal initial deposits. I recommend doing a search for "high-yield money market savings accounts" to see what the best rates are when you read this.
  2. Dividend Stocks: Investing in dividend stocks can be started with relatively low initial capital. You can purchase shares in individual companies using low and no-fee brokerage accounts such as Vanguard.
  3. Peer-to-Peer Lending: Participating in peer-to-peer lending platforms often allows investors to start with a modest amount, with some platforms having minimum investment requirements.

These are general assessments. The specific capital requirements can vary depending on location, market conditions, your investment goals, and your personal circumstances.

Ready to start?

Be sure to conduct thorough research and determine your risk profile before you invest. I also highly recommend you consult a financial professional to determine the appropriate capital investment for your chosen passive income stream.

Before you go... if you read this article, hit me up on Twitter @Contimporary and let me know what you thought or if you have any questions. Cheers!