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How to Invest 1 Million Dollars for Income Passively

How to Invest 1 Million Dollars for Income Passively in 2023

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Many people save significant amounts of money throughout a lifetime with no real plan to maximize those funds. 

However, when individuals choose to invest their savings toward a passive income strategy, they can continue to grow that wealth without any added effort. 

Keep reading if you’re looking for new investment opportunities or want to maximize your saved capital. This guide covers a few ways to invest $1 million dollars to start earning passive income.

Key Takeaways

  • There are different strategies and methods, some riskier than others, that are available to put these savings to work.
  • Bonds, EFTs, and real estate are all strong investments that can earn you a solid ROI if you research and make wise decisions.
  • Real estate syndications are amungst the best way to achieve the benefits of owning large investment properties that cash flow and have unmatched tax advantages, among others, without the hard work of operating the property and executing the business plan.

How to Invest $1 Million Dollars for Income, Passively

$1 million is a large sum of money, making it the perfect amount of raised capital for investing and earning an impactful ROI. 

However, to generate passive income from that sum of money, you need to know where and how to invest it. There are different strategies and methods, some riskier than others, that are available to put these savings to work.

Here’s a closer look at a few different methods for investing $1 million dollars passively to generate additional wealth and resources without any added effort on your part.

1.) Passively in Public Equities (Stock Market)

Investing in the stock market is one of the leading options when investing large amounts of money. 

This type of investment has excellent benefits, such as protection from inflation by achieving annual returns capable of helping to cover these crises.

With public equities, yields can be obtained through dividends and the increase in the price of the shares. Once you’ve invested your initial capital, you won’t have to make any additional effort to receive those yields. 

This method of passively earning income is similar to investing in bonds. So let’s take a closer look at how to achieve yields by investing in bonds.

2.) Passively in Bonds

treasury bonds

Bonds work to preserve capital instead of growing it.

The investment in bonds tries to generate income through the interests generated by counteracting the risk to which the shares are subjected and creating a diversified portfolio. These bonds pay interest income and full initial value at maturity, and although they can fluctuate, it’s less likely or in lower amounts than stocks. 

There are different types of bonds: corporate bonds, municipal bonds, treasury bonds, and international bonds, and all of them work on the same principles.

Investors who want riskier investments may choose to forgo investing in bonds and instead turn to invest in EFTs to meet financial goals. Let’s look at how this works.

3.) Passively in ETFs

Exchange Traded Funds or ETFs are alternative investments that seek exposure to stocks and bonds without needing to make specific investments. This means that ETFs buy portfolios of stocks, bonds, and even index funds based on popular indices such as the S&P 500.

ETFs are low-cost and designed to match the market and avoid underperformance. They also allow investors to build an investment portfolio with many bonds instead of choosing just one. Plus, there are no loading fees and very low expense ratios. 

Now, let’s learn about fixed-rate annuities as an option to earn additional monthly income.

4.) Passively in Fixed Rate Annuities

Insurance providers offer fixed-rate annuities, which are contracts from an insurance company that promises to pay guaranteed interest rates on contributions made to the account.

These contracts are designed to achieve a fixed income stream as they aren’t tied to the performance of other investments. Fixed annuity returns can match the inflation rate, meaning that by investing in them, you can break even.

A final way to invest a million dollars to generate passive income is through real estate syndications. Let’s take a look at this investment strategy to generate additional income through cash-flowing, tax-advantaged commercial real estate.

5.) Passively in Real Estate Syndications

front of multifamily property

A real estate syndication is designed for those with the capital and interest in real estate investing but don’t have the time or the disposition to manage it.

These syndications help investors achieve the benefits of owning large investment properties that cash flow and have unmatched tax advantages, among others, without the hard work of operating the property and executing the business plan.

Among the benefits of real estate syndications are:

  • Passive Income: Investors can earn monthly or quarterly passive income on their investments without the hassle of managing tenants.
  • Tax Benefits: By owning a portion of real estate, investors receive tax benefits through K-1 tax returns to leverage all the depreciation that the property has to offer, to shelter income made on the property
  • Forced and Market Appreciation: Real estate value increases over time, as well as with strategic renovations, and operations on the property to force that value appreciation early on in the project thus increasing the return on investment.
  • Control: Unlike real estate investment trusts or funds, investors can choose which specific deal they want to place their capital in instead of the bucket approach of investing.
Get Access to EXCLUSIVE Tax-Advantaged Multifamily Investment Opportunities

Now that you understand how to make a one million dollar investment let’s talk about how to invest money wisely to create multiple income streams.

What is the Safest way to Invest 1 Million Dollars?

All the methods mentioned above can be great for generating financial freedom, even though every type of investment posses it’s own level of risk. For example, bonds and real estate projects are the safest methods for investing $1 million dollars. 

Bonds are undoubtedly one of the preferred ways for investors just starting since they represent a minimum risk of loss, ensuring a return equal to the initial investment. They also provide earnings through interest. 

While they are the safest investments, real estate investments offer a similar level of security but have all the added upside and tax advantages to go along with it. Next, let’s examine an example of investment and cash return.

$1 Million Invested for 10 Years in a Private Real Estate Syndication

To fully understand how $1 million dollars can grow, let’s take a look at an example. Suppose you invested $1 million dollars for ten years in a multifamily real estate syndication.

You may achieve a 6% or 8% return on your invested cash per year, and most of those cash distributions could be tax sheltered by the significant depreciation that’s leveraged from the property. 

So if you invested $1,000,000 and made a total of $1,600,000 in the form of your share of the cash distributions and sale profits throughout 10 years, this represents a 17% annualized return. ($1,700,000 in profit / $1,000,000 initial investment= 1.7…..Then take 1.6 / 10 Year hold= 17%)

These profits can help you last even longer in retirement without returning to the workforce or finding other means of supporting yourself.

Frequently Asked Questions About What to do With 1 Million Dollars

Yes, you can retire with $1 million invested. Studies have revealed that $1 million dollars can last up to 19 years. In other words, if you retire at 65, at 84 years old, you will need more capital to live on. However, it all depends on the lifestyle of each person and the retired life they want to lead, and their risk tolerance.

Earnings generally depend on the type of investment and the percentage offered for each. For example, if you were to invest that million and earn 7% on that money, you could earn $70,000 in interest over that year.

How Should I Invest 1 Million Passively - Conclusion

There are many ways to invest personal capital that you have saved to obtain passive income. Bonds, EFTs, and real estate are all strong investments that can earn you a solid ROI if you research and make wise decisions.

If you’re ready to earn income passively on any amount of money, join the investor club to get access to our resources and learn how you can invest passively in private multifamily real estate across the southeastern United States.

Sources:

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