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How to Invest $1 Million Dollars for Passive Income

Donny Gamble
January 11, 2022
investing one million dollars
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Earning and spending money is the way the economy works against you, but earning and investing money is how you make it work for you so that you can have disposable income, more money to invest, and the financial power to fund your retirement safely without disrupting your way of life.

Investing is all about passive income. Your money works without you having to spend your time. If you invest $1 million dollars into passive income, you’ll see a return that requires very little maintenance, and shows up in your bank account without you having to put in a 40-hour work week.

We’re going to go over the safest investments that you can make. Reducing risk and truly making this income as passive as possible will let you live your best, care-free life while your money generates more money in the background.

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1. Invest in Cryptocurrency

Similarly to stocks, cryptocurrency prices change and fluctuate all the time, except the market is open 24/7. While cryptocurrency won’t respond the same way that stocks do, some cryptocurrencies do pay dividends, usually around 5% annually. 

That’s not too bad to have in your portfolio, you just have to know which coins actually do this.

Invest in cryptocurrency with your IRA

2. Index Fund

Index funds can’t move the same way that stocks can; you can’t just isolate one stock out of an index fund if it’s doing really well, so an index fund should be part of a broader strategy and generally take up no more than 20% of your total investments.

Start investing with index funds with M1 Finance

3. Dividend Yield Stocks

Remember, the goal here is to have passive income that you don’t have to worry about often. Buying the right stocks and holding them for the long-term don’t just give you annual dividends, but they can appreciate in value, resulting in even bigger dividend paychecks.

Just do yourself a favor and don’t stalk the prices every day, otherwise it kind of takes the passive part right out of this.

Start investing in dividend yield stocks with Personal Capital

4. Invest in a Business

As long as you have some form of advisor to help you detect the volatility of your investment, you could stand to gain a lot of money by investing in a business early in its life.

Not every business is going to become the next big thing, but even then, many businesses in the U.S. are actually small or owner-operated, so there are plenty of opportunities around.

5. ETF's

ETFs work based on specific indexes that you want, whether that’s big tech, the S&P 500, or any other index you can find. They work similarly to index funds, but have no load fees and very low ratios on other fees, so you’ll get to keep your profits (if you play your cards right) more than you could with mutual funds, for example.

6. Partially Funded Peer-to-Peer Loans

Peer-to-peer lending networks can pose a pretty big risk depending on the demographic of the customer and the conditions of the loan office, but overall, they’re not the riskiest thing out there.

However, if you want to lower your risk even further, you can partially fund multiple loans and build a portfolio, accruing income off of each loan as they come back to you.

Since these are done in monthly installments, you’ll spend a little bit of time choosing a loan to fund, and then you’ll receive a return as time goes on.

7. REITs

REITs work similarly to stocks if they’re traded publicly. You buy the “stock” in an REIT, then 90% of the net income from that corporation is paid out to its investors (you). 

The 90% income is what they earn from commercial and residential real estate renting, so you’re investing in real estate while being almost completely hands-free.

Start investing in REIT's by checking out Fundrise

8. Robo Advisors

I know, the word “robo” makes you think of those horrendous phone calls we all receive, but this is a very different type of automation. A robo-advisor will use algorithms and historical data to make intelligent investment decisions for you.

They’re not free, but they’re also not that expensive, either. You can sign up with programs such as Wealthfront or Betterment, and let their service do the work for you. It’s about as hands-free as it gets.

Click here to get started with Betterment

Be Sure to Have a Full Emergency Fund

Investing is great, so long as you don’t need to liquidate it right away to cover your cost of living. Make sure you have a full emergency fund to cover at least one year of living expenses ahead of time. 

This will give you plenty of room to breathe if the world comes crashing down.

Pay Off Your Debts Before You Invest

Debt can dig into your income in many, many ways. It’s best to clear all of your debt before you even begin this journey, otherwise you could end up giving that intelligently-earned investment profit straight to the IRS or debt collectors.

Besides, you can’t really grow equity with a ton of debt at the beginning.

Contribute to Retirement Savings Before You Scrape Off the Top

Contributing to your retirement is another way to grow your money. It’s going to help you down the line, and while the pay-off isn’t something you’re going to see until you’re nearly sixty, hopefully by that point your intelligent investments will have led to a lessened requirement for your retirement fund anyway.

Next Steps

Investing is the only way to properly grow your wealth, and if done right, you can live off your dividends and be a full-time investor. It just takes a hefty bit of capital to get started, but remember that even if you’re just window shopping for investment opportunities right now, you can start with even investing $500 per month to start growing your wealth as soon as possible.

Investing $1 Million FAQ's

Can you live off of dividends?

Absolutely. With a million dollars, many could live below their means off of a simple 4-5%, and reinvest anything over that to continually grow their investments and receive even more total income from those dividends later on.

It’s reasonable to live off of your dividend income, but there’s always going to be that hunger to invest more.

Is $1 million in investments enough to retire?

Technically, yes; you could retire very young. You can diversify your portfolio enough to the point that you earn a 9% return on a million dollars, and live very comfortably on $90,000 worth of income every single year.

However, you have to keep inflation in mind, and that once you invest $1 million, you’re not just done with investing.

You should either find a way to continually contribute money to your investments, as they may rise and fall over time, and so that you have a failsafe in the event of an economic collapse or financial crisis.

If you can hold onto your investments through all of that, you’ll come out clean on the other side.

How do you make your money work for you?

Stock prices need to rise, businesses need to thrive, and everyone in this life is looking  for more cash. To let your money work for you, you have to first find something worth investing it in that will give you a low risk, and high yield return.

This is best done with a diversified portfolio, because if one wealth sector begins to crumble and fall, your other assets will still be able to bring you an income.

Investing in index funds, stocks, DRIP accounts, REITs, or your own real estate can all yield a return on investment, and that can help you gain even more equity to further your investments in the future.

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About the author 

Donny Gamble

I’m Donny. I’m a world traveler, investor, entrepreneur, and online marketing aficionado who has a big appetite to compete and disrupt big markets. I thrive on being able to create things that impact change, difficult challenges, and being able to add value in negative situations.

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