Posted by Passive Income
Passive income means that you can continue to earn income without directly participating in business. Providing services or exchanging time and labor. However, it does not mean that you have no work or effort at all. But generally, you invest a certain amount of time and resources in the early stage to establish and manage the corresponding investments or assets. The advantage of passive income is that it can create a stable income for individuals. There is no need to exchange labor time for income. In disguise, people can free up more time and space to do what they want to do. And it also helps to achieve financial freedom.
Generally, products that can generate passive income include bank deposits, safe-haven currencies, bonds and bond funds, and gold. The products included mainly investing in government short-term bonds, bank deposits, and other relatively safe monetary instruments. Which can also bring you a relatively stable passive income.
Method 1 for passive income
A fixed deposit is a financial product, usually provided by banks, and supports currencies such as US dollars, etc. It is a way of saving. You deposit a sum of money into a fixed account opened by the bank and agree not to use the money within a specific period (called the deposit period). Common deposit periods are 7 days, 1 month, 3 months, 6 months, 1 year, etc., depending on your needs. During this period, the deposit amount will earn the agreed interest. When the deposit period ends, you can get back the principal and the accumulated interest.
However, if there is a sudden lack of cash flow during the period and you want to withdraw the money in advance, you will lose the interest and need to pay a penalty or handling fee. Fixed deposits are a relatively safe investment method. The Hong Kong Deposit Protection Scheme provides each depositor with a maximum of HK$500,000 in protection for their funds in each member bank.
However, it should be noted that deposit interest rates may be affected by inflation and other economic factors and may not be able to completely offset the depreciation of funds caused by inflation.
Fixed deposits have the following advantages and disadvantages:
Fixed Rate
Fixed deposits usually offer a fixed interest rate, which means you can be certain of your return over the term of your deposit. This helps you make accurate financial plans and know how much interest you will earn.
Safe and hassle-free
A fixed deposit is a simple and easy-to-understand financial product. You only need to deposit money into the bank, agree to the deposit period and interest rate, and then wait for the deposit to mature and get back the principal and interest, without having to keep an eye on the market for a long time.
Low risk
Compared to other investment options, such as stocks or bonds, term deposits are a lower-risk way to save. The amount you deposit is usually protected by a deposit insurance scheme, which means that even if the bank encounters difficulties, deposits of $500,000 or less are protected.
Low liquidity
Due to the nature of a time deposit, your funds are fixed during the deposit period and cannot be accessed at any time unless you pay a penalty or handling fee. If you have the opportunity to use these funds in the short term or in an emergency, a time deposit may not be the best choice.
Minimum deposit
Regular deposits in banks generally have a minimum deposit requirement, and the current minimum deposit amount is generally HK$10,000. If you want to get a higher interest rate, the minimum deposit requirement will also be higher. Virtual banks may not set a minimum deposit requirement.
Inflation risk
The fixed interest rate over the term of your deposit may not fully offset the effects of inflation. If the inflation rate is higher than the interest rate on your term deposit, the real purchasing power of your money may decrease.
Further reading: Comparison of the latest bank fixed deposit interest rates in 2025
Passive Income Method 2: Bonds
Bonds are financial instruments issued by issuers to raise funds, promising to pay interest at a set rate within a specific period of time. Return the principal on the maturity date. As an investment tool with a long history, bonds have long been favored by all kinds of investors due to their characteristics of regular interest payments and principal return on maturity. In particular, sovereign bonds issued by countries or governments are known for their high security. As an international investor, the bonds that are more accessible are probably Treasury bonds issued by the US government.
US Treasury Bonds (also known as US Treasury Bonds) are long-term debt instruments issued by the US government to raise funds to support its operations and repay debts. These Treasury bonds are mainly issued to a variety of investors, including large institutions and individual investors. Enjoy high liquidity and excellent reputation in the global financial market. Due to their robust and safe characteristics, US Treasury bonds are often regarded as one of the preferred investment tools in risk management strategies. Fiduciary provides US Treasury bonds of different maturities to meet investors’ goals of obtaining stable dividends.
What are the benefits of buying US bonds?
Security
Since U.S. debt is issued by the U.S. government, it is basically guaranteed by its credibility and debt repayment ability.
Fixed Return
Therefore, U.S. Treasuries are generally regarded as “non-default” bonds and are known as one of the safest investment tools in the world.
Higher liquidity
U.S. Treasury bonds can provide investors with fixed returns. So after purchasing U.S. Treasury bonds, investors can obtain stable interest income.
Balancing risks
Compared with other types of bonds, U.S. Treasury bonds have higher liquidity. If you buy high-risk products and U.S. Treasury bonds at the same time. U.S. Treasury bonds can play a role in balancing risks and returns.
What are the risks of buying U.S. Treasury bonds?
However, although the risk of default of US debt is low, it is possible that it will happen. In addition, there are:
Interest rate risk
Bond prices are inversely proportional to interest rates. That is, the lower the interest rate, the higher the bond price. Conversely, the higher the interest rate, the lower the bond price. In other words, investors will tend to deposit their money in banks. The attractiveness of bonds will decrease, which will lead to a drop in market prices. Investors who have already purchased bonds may suffer losses.
Exchange rate risk
Whenever you buy overseas bonds, there is exchange rate risk.
Passive Income Method 3: Dividend Stock Portfolio
The “Dogs of the Dow” is a dividend stock investment strategy proposed by Michael B. O’Higgins in 1991, specifically for investors seeking dividend income. The operation of this strategy is very intuitive: select the ten stocks with the highest dividend yields from the Dow Jones Industrial Average, buy them at the beginning of each year, and sell them at the end of the year.
In 2022, when the overall performance of the US stock market was poor, the portfolio using the Dow Dogs strategy performed well, with an overall increase of 2.2%. In contrast, the Dow Jones Industrial Average fell 8.8%, and the S&P 500 and NASDAQ indexes fell by more than 10%. This shows that when the market is unstable, a portfolio pursuing dividend income can serve as a safe haven for investors.
This strategy is suitable for investors who have a lower risk tolerance and prefer stable dividend income. But still expect to achieve a certain amount of capital appreciation.
Although it sounds stable, there is still the possibility of incurring losses. For example, dividends may be stopped at any time, and interest may be lost.
How does the Dog Stock Dividend Portfolio work?
The core idea of the Dow Dogs strategy is to focus on dividend yield as a key indicator for evaluating stock value. A high dividend yield usually means that the stock price may be undervalued, providing the potential for earnings that exceed the market average.
This principle is based on the fact that the 30 components of the Dow Jones Index are generally carefully selected large, well-established blue-chip stocks with good financial conditions and multi-billion dollar market capitalizations and stable profit records.
These companies tend to have a long history of paying dividends and are not prone to changing their dividend policies. So the dividends are stable. However, their share prices may still be affected by the overall market environment and economic cycles. When a company is at the bottom of its business cycle, its share price tends to be lower than at its peak.
Therefore, stocks with high dividend yields may represent companies that are currently at the bottom of their business cycle and have relatively low share prices. Providing investors with an attractive entry point in anticipation of future appreciation opportunities.