How to make passive income with stocks

Written by Coursera • Updated on Nov 1, 2022

With a passive income stream, you can earn money over time with little to no sustained effort. Here are some ideas to get started.

Passive income is a money stream that requires little or no continuous effort. As a business model, it’s largely self-sustaining; often, passive income involves some kind of upfront or intial investment that generates long-term steady gains.

Formally, the Internal Revenue Service (IRS) defines two “passive activities” [1]:

1. Trade or business activities that don’t require material participation

2. Rental activities

Under their definition, passive income can come from things like financial investments—such as stocks, mutual funds, and royalties—or owning a rental property.

In this article, we’ll go deeper into what qualifies as passive income and offer some ideas you can try to start earning.

What is passive income?

Passive income is the opposite of active income. With active income, you are paid for the work you continuously do. Most careers or side hustles qualify as active income. With passive income, you do the work first, then collect payment over time—no further effort required.

Earning passive income can be an enticing idea, but it’s important to note that it can take some time to grow your investments. If you are looking for quick cash, you may want to consider starting a side hustle or pursuing a high-paying career path.

However, if you have time to watch your investment grow—and especially if you’re willing to put a little bit of sustained effort into nurturing that growth—building a passive income stream can be lucrative. 

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How to make passive income

When people talk about “earning money in your sleep,” they’re referring to passive income. Traditionally, you would do this through financial investments. Nowadays, many creatives start a passive income stream by creating a digital product that you can sell repeatedly.

Here are some things to consider if you want to start earning passive income:

• What kind of upfront investments can I make (think in terms of money, time, and effort)?

• Do I have any skills or knowledge that other people may find helpful?

• How can I automate the process of sharing my skills or knowledge?

Depending on the passive income stream you choose to pursue, there may be things you can do to increase your short-term earnings. For example, some people who sell digital products will use various marketing strategies to enable more people to discover their products, which leads to more sales in a shorter period. Others may scale the scope of their passive income business with new products that further their initial offerings to recapture an established client base.

11 Passive income ideas

The first step toward earning a sustained income stream is choosing the passive source of income that makes the most sense for you. Whether you want to make a financial investment or start a business, here are 11 ideas to consider for your passive income strategy:

1. Make financial investments.

Financial investments include a range of options, such as investing in the stock market, mutual funds, bonds, and peer lending, and they require minor follow-up work as they accrue interest. Work with a financial advisor to figure out the best investment options for you.

Pros:

• High growth potential over time

• Minimal maintenance

Be mindful of:

• May have limited access to funds in the short-term

• Subject to tax requirements

2. Own a rental property.

Rental income can be a steady way to earn extra money, but, whether you house long-term tenants or short-term renters, this passive income source comes with all the required maintenance of regular home ownership.

Pros:

• Rental income can be a lucrative long-term investment

• Can begin earning money as soon as first renters move in

Be mindful of:

• Responsible for property upkeep

• Only earn when you have renters

3. Start a print-on-demand shop.

You can sell your original designs on shirts, hats, mugs, posters, and other products, without dealing with inventory and fulfillment by opening a print-on-demand shop. All you need to do is select your provider—companies like Printful, Printify, or Gelato—upload your file, choose the products you want to sell, and advertise them on your online store.

Pros:

• No inventory or fulfillment needs

• Create original products

Be mindful of:

• May need to engage in self-promotion and marketing

• May need to handle customer service issues

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4. Self publishing

If you have a wealth of knowledge or an idea for a story, you can write a book and sell it online. Many people choose to use a service like Kindle Direct Publishing, which enables you to transform your words into an ebook or print edition and sell it on Amazon.

Pros:

• Write something that you feel proud to share

• Retain complete control over your creative process

Be mindful of:

• Can take a lot of time to prepare a book for publication

• May need to engage in self-promotion and marketing

5. Sell worksheets.

There are several places where you can upload and sell worksheets online. Typically, the way this works is you create a printable worksheet and upload it to a website like Etsy or Teachers Pay Teachers, where people can pay to download and use your creation.

Pros:

• Easy and inexpensive to create

• Utilize your specific expertise

Be mindful of:

• May take time to generate noticeable returns

• Host websites may charge sales fees

6. Sell templates.

If you enjoy creating digital organization systems in programs like Microsoft Excel or Notion, you might be able to sell your templates. Many people monetize their creations on Etsy or other online marketplaces.

Pros:

• Easy and inexpensive to create

• Combine organization and design skills

Be mindful of:

• May take time to generate noticeable returns

• Host websites may charge sales fees

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7. Create content.

If video is your medium of choice, you can earn money by uploading your original creations to YouTube and setting your account up for monetization with the YouTube Partner Program. There’s no limit to the types of videos you can create—informational, short film, original music, even ambient noise—however there are a number of requirements to join the YouTube Partner Program, including a minimum number of views and followers.

Pros:

• Retain creative control over the work you produce

• Can continue earning money from the same videos long as you remain in the YouTube Partner Program

Be mindful of:

• Requires building a following of 1,000 subscribers

• Requires publishing new content every six months

Read more: What Is Content Marketing?

8. Create an online course.

Somewhere in between writing a book, selling worksheets and templates, and creating content, you may decide to package the resources you create as an online course. Many people create their content with platforms like Thinkific or Teachable, then host their courses on their own website.

Pros:

• Highlight your unique expertise

• Package a range of creative offerings

Be mindful of:

• Labor intensive start-up process

• May need to engage in self-promotion and marketing

9. Sell stock photos.

Whether you’re an amateur or seasoned photographer, you can sell your original photos as stock images using sites like Alamy, Shutterstock, Stocksy, or Adobe Stock.

Pros:

• Start a photography business without finding clients

• Retain creative control over the work you produce

Be mindful of:

• A lot of legalities to learn and navigate

• Host websites may charge sales fees

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10. Create an app.

You can passively monetize your creative skills as a developer by creating a mobile app and selling it via the Apple App Store or Google Play. 

Pros:

• Build a tool that can reach many people

• Put your developer skills to the test

Be mindful of:

• May require updates and maintenance over time

• App store hosts may take hefty fees

11. Affiliate marketing

Affiliate marketing is an area of digital marketing in which a person promotes products and receives a portion of the sales generated from their unique affiliate links. Many bloggers combine Search Engine Optimization (SEO) techniques with their affiliate marketing strategy to maximize their income.

Pros:

• High earning potential

• Option to promote a range of products

Be mindful of:

• May take some time to begin earning

• Posts may require maintenance or updates over time

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Start your passive income stream

When it comes to a business model centered around passive income, the more people who know about your product, the more money you stand to make. Learn how to create and analyze effective advertising campaigns and leverage your social media presence with the Facebook Social Media Marketing Professional Certificate, available on Coursera. Another option to consider is Google's Digital Marketing & E-commerce Professional Certificate, which teaches in-demand skills for today's digital marketing economy.

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Written by Coursera • Updated on Nov 1, 2022

This content has been made available for informational purposes only. Learners are advised to conduct additional research to ensure that courses and other credentials pursued meet their personal, professional, and financial goals.

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