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6 Types of Passive Income in Malaysia


There are many types of passive income in Malaysia. This guide will help you to navigate most, if not all available options and help you decide which ones to consider doing, based on your interest and/or skillset. I’ll also share the passive incomes that I personally have.

Passive income vs active income

Firstly let’s make the distinction between passive and active income:

  • Active income is income derived from constant effort, on an ongoing basis. Your day job is an example of this. My writing business is an example of this.
  • Passive income, on the other hand, requires one-time massive work, then will generate income ‘as you sleep’. It requires inactive participation – perfect for lazy smart people.

Note: No passive income in Malaysia is totally passive. There might be some ongoing work to maintain it, but for the most part you can leave them to do its thing. Which is cool, because then you get to do the funner things in life.

It is important to have a few steady sources of passive income. When you can’t work – by choice or by force – this will be the money to keep you going. They say that true financial freedom comes when you can quit your active incomes and rely on your passive incomes. I think that’s true!

Types of Passive Income in Malaysia

To the best of my ability, I have researched all the possible types of passive income that you can get as a Malaysian. If any of the information below is inaccurate or lacking, please let me know in comments! I categorised them into six types.

#1 Property

What this entails: Buy and rent out property spaces to tenants. To make this profitable, the amount of rent must exceed the amount of monthly/yearly payments you make (not just mortgage, but also insurance, taxes, etc).

The (oversimplified) steps if you want to do this type of passive income:

  • Research locations and demand
  • Buy/lease the property
  • Renovate it (optional, but common in order to attract tenants and get good price)
  • Hire property agent to handle rental inquiries and draw contracts
  • Hire property manager to look after the property (optional, but not uncommon. Who wants to deal with leaked toilets?)
  • Receive rental checks monthly or according to agreed schedule

Pro: If you get tenants for the whole duration of the mortgage, you are essentially getting the property for free by the end of the term.

Con: Tenant woes; high start-up cost

Alternative: REITs (Real Estate Investment Trust). Similar to above, but the property management team will do the work for you. You don’t own the property though.

#2 Intellectual Property

What this entails: Create/make software, apps, websites, books, songs, graphics, photographs and sell them on online platforms (either directly or via advertising revenue). To make this profitable, networking/marketing/advertising efforts must be ongoing so you can expose the product to new audiences. To make it ‘passive’, you can outsource and/or automate this.

The (oversimplified) steps if you want to do this type of passive income:

  • Research what’s in demand (commonly overlooked)
  • Make said intellectual property and trademark it/proof ownership (stealing happens)
  • Package it to the right target audience
  • Choose selling platforms
  • Market/advertise the heck out to the target audiences
  • Receive royalties when people buy/use it

Pro: Lower start-up cost; infinite income potential

Con: Most IP don’t make much money due to too much competition; piracy; lack of marketing/advertising

#3 Lower Risk Investments

I’m grouping a few types of investments here because they’re similar: Mutual funds (ASB, ASW, etc), fixed deposit, unit trust, stocks/shares from blue-chip companies that give dividends (big, stable companies that everyone have heard of), ETFs (Exchange-Traded Funds) and REITs.

The (oversimplified) steps if you want to do this type of passive income:

  • Choose the right vehicles for you – probably the hardest part. Malay people have it good with ASB, but the rest of y’all have to research a bit more on brokerage fees that’ll eat into your income
  • Contribute monthly/yearly (you can automate this)
  • Receive dividends*, usually yearly (*sometimes you don’t get this if the company is not profitable that year, or if they made a loss)

Pro: Easiest type of passive income to get into; great for long-term investors as you can just forget about it

Con: Not much control; have to learn withdrawal strategies so you don’t withdraw too much

#4 Higher-risk Investments (NEW)

Tricky category because higher-risk investments that are NOT scams are pretty diverse. For example, you can invest via P2P (peer-to-peer) lending platforms, ECF (equity crowdfunding) platforms, cryptocurrencies. (Note: Are there more? Add in comments!)

The (oversimplified) steps if you want to do this type of passive income:

  • Pick a legit platform. There are many illegal platforms for these types of investment. This is the list of unauthorised investment platforms in Malaysia, as per Securities Commission. If the one you picked is in here, take your money out ASAP and report their ass.
  • Research market condition. Everyone wants your money to make money, but will they, realistically speaking? Access to industry-specific insight is a must.
  • Give money to them. There may be maximum limit that you can invest, so check with the platform.
  • Wait for them to start making profit so you can cash out.

Pro: If you’re lucky, the profit will be really good. It’s possible to get back 100% return on investment, or more.

Con: You must be OK with not getting your money back. It can be all or nothing. It’s not uncommon to lose all initial investments. For this reason this may not be suitable passive income strategy for retirees

#5 Keep valuable items

What this entails: Some items make great passive income as their value grows. However, there are no guarantee that the worth will remain the same after some time. For example, tulip bulbs and Beanie Babies used to be sold/traded for high profits, but not any more.

That said, a few things stood the test of time, but they’re still not guaranteed. For example gold, antiques and rare collectibles. I’d even put properties and currencies in this list. Basically, things that have value, according to society at large. Some may overlap with #4.

The (oversimplified) steps if you want to do this type of passive income:

  • Make research on supply and demand, know everything about it and the market price (be expert-level, preferably)
  • Purchase said items
  • Keep said items safely and in good condition
  • Sell when the timing is right to the right buyer (to be fair, it’s incredibly, incredibly hard to get the timing and buyer right)

Pro: Suitable for already-hobbyists and experts in the field

Con: Kind of risky, you won’t know if you’ll make a profit until you sell it

#6 Referral-type Investments

I don’t like these at all, but most of you would have been exposed to some of these by now. Some are legit, but others are in the category of investment scams (read how to avoid them here). They usually make money for the top few people in the pyramid, but the rest will lose money.

The (oversimplified) steps if you want to do this type of passive income:

  • Choose a platform to be part of their network, pay their fees
  • Promote to friends, families, colleagues and acquaintances (I’d argue that this makes it borderline active income, but anyway)
  • As your network below you grows, and your referrals get their own referrals, you get income from their fees
  • Collect income

Pro: Technically unlimited income potential

Con: You’ll become ‘that’ person; if you promote HYIPs (high yield investment programmes) / Ponzi schemes, there’s a chance you’ll get harassed by people wanting their investment back.

My passive income streams

I love the word ‘streams’, it’s pretty refreshing to have nature references in investment. I have the image of pretty small river trails that leads to the ocean (aka my bank account) 🙂

Here are my passive income streams:

Lower-risk investment:

Higher-risk investment:

  • P2P lending
  • Investment in a few cryptocurrencies, especially bitcoin (very risky – read my bitcoin guide before you even consider this)
  • Gold
  • ETFs in Wahed Invest and MIDF Invest (I condiser risky as my portfolio is Aggressive)

Note: There are many investments in Malaysia that you can start with RM1000 capital or even lower.

Intellectual property:

Misc (not sure where to put):

Lastly

As someone who loves the idea of constant income generation even when not working (who doesn’t!), I always look around for more opportunities. However, from years of reading up on it, I regret to say that this is most probably it.

Feel free to challenge me on this, but I do believe that whatever new passive income opportunities you may have heard is most likely investment scams. ESPECIALLY if they depend on referrals.

What do you think of this guide? Are you doing passive income, and if yes which ones? If no, which ones are you considering?

As always, if this guide helped you, share it around 🙂





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