The Best Sources of Passive Income Online (My Rankings)
I’ve written before about 142+ ways to make money online, but there was no formal ranking involved. Sometimes when you only have time to do one or two things, you want to “work closest to the money” – in other words, you want to do whatever is going to maximize your earnings (considering both short and long term potential).
With that in mind, I’ve decided to rank various sources of passive income in broad terms, however I will give some examples for each category. Keep in mind, these rankings are based on my own opinion and experience – feel free to disagree with them in the comments.
Here Are the Rankings…
This isn’t an exact science, but I tried to base the rankings on the overall income potential, the “start-up time” required to begin earning, as well as how passive the type of income actually is (i.e. how much ongoing work is required to maintain the income).
1) Investing Online
In the “internet marketing” blogosphere, everyone focuses on building micro-niche sites, authority sites, pay-per-click advertising, and other various affiliate product promotion means. People seem to always overlook a source of passive income that existed before the internet itself – investing (in financial instruments).
The problem with investing is that most people feel they lack the financial expertise to make an informed decision, and people also tend to believe that investing requires a large sum of money to get started (which of course will magnify the risk involved). While these concerns are true in many cases, they don’t always need to be.
I’m not telling you to go out and buy 100 shares of Google’s stock (by the way, this would cost approximately $60,000 at the time this post was written). In fact, I’m not saying you should directly buy stock in a company at all. Here are a couple things I’ve done with investing that I don’t believe require substantial risk:
- Lending Club (U.S. Residents Only) - I talk about Lending Club in every one of my income reports, because I still believe it’s the best source of passive income, even though it’s not my largest source. You can get started for as little as $25, and over the past 2+ years, my interest rate has been 7% or higher, which I think is very good given the relatively low risk involved. This is even more true given the recent market downturn. You can read about how I select my investments here.
- Investing in Index Funds – I use Vanguard for this, but there are several reputable sites out there that allow you to do the same thing. It’s a good way to invest excess cash that you don’t need now and use it to diversify your portfolio. I’m not going to make a specific recommendation here, but Vanguard does have a page that will make a recommendation to you based on your risk tolerance. This is generally going to require more up-front money than Lending Club (probably $1,000+), but if you have the money, it’s something to consider.
Here’s how “investing online” did with my three criteria:
- Overall income potential: Satisfactory - Your income potential will generally be directly related to how much you invest.
- “Start-up time” required: Excellent - Investing requires very little up-front work. Usually most of the time will be spent setting up the account (a one-time task) and selecting your investments.
- How passive it really is: Excellent - Once you set up your investments, it becomes very hands-off. The only additional time necessary is figuring out how to re-invest any interest you earn.
2) Article Writing
Article writing is one of those things that isn’t at all glamorous, and few people will get excited about it. With that said, it’s one of the easiest ways to set up your passive income stream. To give you some perspective, I wrote about 120 articles late last year and have hardly written any since then. Since that time, my articles have earned me over $700. I continue to earn $70-90/month without having to do any additional work, which is something I look forward to every month.
There are a lot of article sites out there that share revenue, but my favorite (and it’s where I earn most of my article writing income) is InfoBarrel, which you’re very familiar with if you’ve been following my blog for awhile. If you’re up for a very ambitious challenge, you can read about the one I wrote for earning $2,000+ per month with article writing. The top InfoBarrel writers currently earn at least $2,000 per month.
One added benefit to writing articles for passive income is that you can use these articles as backlinks for your niche sites and possibly other articles you’ve written on other platforms. It’s a great way to kill two birds with one stone.
Here’s how article writing did with my three criteria:
- Overall income potential: Good - If you’re willing to put in the up front work, this can be a great source of future passive income.
- “Start-up time” required: Poor - Unfortunately, before you start earning a lot of money, you will need to spend a lot of time writing. You can offset this “pain” by using your articles for SEO/backlink purposes as mentioned before.
- How passive it really is: Excellent - Once your articles are written and ranking (which can happen without much backlink effort if you pick good keywords and write for a major article site), you can enjoy regular income without much effort at all.
3) PPC Arbitrage
This is something I never discuss on this blog because quite frankly, it’s not something I ever do. Nevertheless, there are internet marketers around the world who make a living doing it, so it’s worth mentioning. So what is PPC (pay-per-click) arbitrage?
Others may define it more narrowly, but to me, PPC arbitrage basically involves setting up PPC ads (via Google AdWords or similar platform) and directing the traffic that results from ad clicks to a landing page or straight to an affiliate link (which many platforms don’t allow anymore). The goal is obviously to earn more from the affiliate income than spent on the ad clicks. You aren’t adding any value, but merely earning more from traffic than what it costs you to generate that traffic.
I’ve read stories about people setting up ad campaigns and making thousands of dollars within a matter of hours. What’s the catch? The big one is risk. You’re spending money to make money, so if you turn out to set up a bad ad campaign that doesn’t convert well, you can easily lose lots of money. That’s been the primary reason I’ve stayed away from this method of making money online. I’m not going to bother giving advice here, because as I said, this isn’t something I’ve done. If you’re interested, you can probably find a lot of good information via Google, but watch out – as with any other internet marketing topic, most everyone is going to try to sell you something.
Here’s how PPC arbitrage did with my three criteria:
- Overall income potential: Uncertain - Although some people can make a lot of money with this, it’s also possible to lose a lot of money. So although income potential can be high, it’s too uncertain unless you’re experienced and can take on the associated risk.
- “Start-up time” required: Good - Ads are generally easy to set up, but it does take some time to find the proper affiliate offer to promote, and there could also be additional time if you are creating a landing page. Overall though, the start-up time isn’t too bad.
- How passive it really is: Excellent - Once your ads are running, you could literally just sit back and watch the money roll in. Again, you are spending money to make money here, so there is risk involved. However, once the ads are set, the income can be very passive. Keep in mind, you may need to monitor and possibly modify ads if they aren’t performing well.
4) Niche Website Creation
This is an area I write a lot about here, because this is where most of my internet activity is focused. Although passive income is something I’m always after, niche websites rank pretty low on this list, ironically.
“Niche websites” can be a lot of things, but when I speak about them, I am typically referring to websites that aren’t particularly deep in content and generally target a specific long tail keyword. With niche websites, you’re more focused on generating traffic with SEO than by building a community.
I’ve written a lot about niche websites on this blog, but here are some highlights:
- My Amazon Niche Site Challenge
- How to Build a Niche Site in 0 Hours
- Niche Site Duel and Amazon Niche Sites Updates (this link is to a category of posts)
My ultimate goal is to have niche sites generate a “full time” income, so I continue to build new sites on a monthly basis. Unfortunately, they are not as passive as you’d like them to be.
Here’s how niche websites did with my three criteria:
- Overall income potential: Excellent - Although it’s very possible to make $0 with a niche site if it doesn’t receive traffic, you can also make a lot of money if you rank well for good keywords. It’s not likely that you’ll make a living off one site, but they are generally easy to build. If you can build one successfully, you can probably build several more.
- “Start-up time” required: Poor - Experienced niche site builders will be well versed with outsourcing certain tasks and running through the whole process very efficiently, but when you first start out, it can take a long time to earn your first dollar from a niche site. Doing research, designing the site, writing content, and doing proper SEO work can all be very time consuming, and the payoff isn’t always something you can rely on.
- How passive it really is: Satisfactory - Because of all the upfront work required, it’s hard to consider this income very passive. Once the site is in good standing, it’s great, but there may be upkeep required along the way to maintain the income (like creating more content and more backlinks).
5) Blogging/Authority Website Creation
I struggled to even include this as a source of passive income, but it’s something that you would probably expect to read about on this list, so I had to add it. I love blogging, and I love working on authority websites that cover a topic that interests me. The problem is, these are both very active (i.e. the opposite of passive) projects.
There are, however, some aspects of both that can be considered passive. For example, I may have an affiliate link on a blog post I wrote a year ago, but someone could visit it today and I could earn money from the sale of a product. Much like article writing, one piece of writing can result in endless future income.
Blogs and authority websites are different than niche websites, because they generally imply on-going content generation. Sure, I could stop writing on this blog today and let it sit forever, but that’s not the intention of the blog. Furthermore, blogs and authority websites tend to include a community or social aspect. We have Facebook pages and Twitter accounts (can someone explain to me why the hell I haven’t made a Facebook page yet?), and we discuss various topics in the comments of each article or blog post. Although SEO does affect traffic, community is more important.
Here’s how blogs/authority websites did with my three criteria:
- Overall income potential: Good/Excellent - The only reason this wasn’t completely rated “Excellent” is because not all blogs are created with the intention of making money (unlike everything else on this list). Blogs and authority websites can earn massive amounts of money, but it’s going to vary widely.
- “Start-up time” required: Poor - As you may have experienced, creating a successful blog or authority site is a lot of work. Writing content, interacting with readers, and continuing to find ways to keep people coming back are not easy tasks. Standing out in the crowd is even more difficult, if you aren’t targeting a very specific niche.
- How passive it really is: Poor - For all intents and purposes, you’re never truly done working on a blog or authority website. You can always write new content, modify the design, etc. Although certain parts of the site may earn you income passively (like a Resources page), the site as a whole is very much an active undertaking.
What do you think?
Would you rank these differently? Is there something you would add or change? Let me know in the comments!
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