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Passive income ideas for New Zealand investors

Find out how to make your money work as hard as possible while you’re fast asleep.

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Earning money without having to lift a finger sounds too good to be true, but it is possible. There are several ways that your money can earn more money while you sleep, allowing you to build a bigger savings balance without putting in the hard work.

Here are three easy ways to earn some extra money on the side, each of which has its own set of advantages and disadvantages.

Dividends from shares

When you buy shares in a company, you own a portion of that company and are entitled to a share of its profits. When the company’s share price increases, the value of your “parcel” of shares also rises.

However, there’s also another easy way to make money from shares: dividends. Some companies pay “dividends”, which are a portion of the company’s profits, to each shareholder at specific times throughout the year. Not all companies pay dividends, but investing in those that do is a great way to generate a passive income.

Plus, you don’t only have to invest in shares in Kiwi companies either. If you open an account with one of the many online share trading platforms on offer, you can trade shares not only on the New Zealand Stock Market (NZX) but on major stock exchanges around the world. So while you’re catching up on your beauty sleep, your investments could be earning you big bucks.

What are the pros and cons of investing in shares?

Pros
  • Capital gain. Investing in shares allows you to take advantage of capital gains from the growth in a company’s share price.
  • Income. If you buy shares in companies that regularly pay dividends, they can provide an ongoing source of income.
  • Global markets. Because you can buy and sell shares on stock exchanges all around the world, you can ensure that your money is working as hard as possible even while you sleep.
  • Convenient. It’s quick and easy to buy and sell shares online whenever it is convenient for you to do so.
Cons
  • There are risks involved. While share prices can increase, they also have the potential to decrease and there is a real risk that you could lose the money you invest.
  • Prices fluctuate. Share prices fluctuate all the time – check out a graph charting the performance of the NZX for a visual representation of this – so you could wake up in the morning to find out you’ve lost money.
  • Dividends may come and go. Because companies pay dividends when they earn a profit, you may find the dividends dry up along with your initial capital if a company starts to underperform.

Compare share trading platforms

Data indicated here is updated regularly
Name Product Min. monthly fee Currency conversion fee Available markets
Stake
$0
1% ($2 min)
NASDAQ, NYSE, BATS, Chicago Stock Exchange, And more
Sign up through Finder and use referral code "FINDERNZ" for a free stock. Trade 3,500 US listed stocks and ETFs through Stake with $0 brokerage.
Hatch
$0
0.5% above mid-market rate
NASDAQ, NYSE
Sharesies
$0
0.4%
NASDAQ, NYSE, NZX, CBOE
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Peer-to-peer lending

Have you ever looked at the interest rates banks charge on their personal loans and wished that you could earn the same rate on your savings? Well, it’s now possible for anyone to become a lender, thanks to the rise of peer-to-peer lending services.

The concept behind peer-to-peer lending is quite simple: if you have money to invest, a lending service matches you with a customer looking for a loan. The matching process takes place through an online platform such as a website and allows you to cut out traditional lending institutions such as banks.

You put your money towards a managed investment product, and the borrower pays the loan back over time with interest. Peer-to-peer investing is available for personal and business purposes, with companies such as Lending Crowd and Squirrel Money offering this service.

What are the pros and cons of peer-to-peer lending?

Pros
  • High-interest rates. The interest rates on peer-to-peer loans are typically substantially higher than the interest rates offered on savings accounts and term deposits.
  • Diversification. Peer-to-peer lending offers a unique opportunity if you’re looking to diversify your investments, plus you can also minimise risk by spreading your funds across a number of loans.
Cons
  • New service. Peer-to-peer lending is still a relatively new offering in the New Zealand financial marketplace, so make sure to check the credibility of the lending platform before handing over any money.
  • Risk vs reward. While peer-to-peer lending does provide the potential for high returns, there’s also the risk that the borrower may not repay the loan.
  • Defaults and fees. You need to check with the peer-to-peer lending service to find out what happens if the borrower defaults on the loan. It’s also important to find out information on how the interest rate is set, whether you need to pay fees to the lending platform and what happens if the platform operator goes broke.

Rent out a property

If you’re lucky enough to own more than one property, renting out the spare one is an excellent way to generate an ongoing source of income. If you live in a larger city like Auckland or Wellington, you could earn a substantial amount of income by renting out a house, apartment or granny flat. While there’s undoubtedly some work involved in acquiring an investment property, an experienced property manager can look after your investment while you sit back and wait for the money to flow in.

However, you don’t even have to own an investment property to make money from rent. Thanks to accommodation sharing services like Airbnb, you could rent out your home while you’re away on holiday. You could even rent out a parking space or office space that you’re not using, which can provide a steady source of extra income with minimal effort involved. If everything goes as planned, all you have to do is place an ad.

Pros and cons of renting out a property

Pros
  • Earn money from something you don’t use. Got a spare granny flat or parking space you don’t use? Rent it out and start making money.
  • Capital gains. If you own an investment property, not only can you benefit from ongoing rental income but you can also take advantage of long-term capital gains.
  • Long-term security. The ongoing returns provided by renting out a property can provide money for your rainy-day fund or act as an extra source of income.
Cons
  • Property damage. If you’re unlucky enough to end up with bad tenants and they damage your property, you could be left with an expensive repair bill.
  • Property management costs. Whether you manage the property yourself or employ a real estate agent as a property manager, you need to factor these costs into your budget.

These are just a few of the ways you can make money while you’re sleeping, and there are plenty more you can think of if you put your mind to it, so consider putting one or more of them to work for you. When you make money while you sleep, it’s hard not to wake up happy.

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs comes with a higher risk of losing money rapidly due to leverage. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

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